Current Report Filing (8-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 16, 2014

Rackspace Hosting, Inc.

(Exact name of registrant as specified in its charter)

Commission File Number: 001-34143



Delaware		74-3016523
(State or other jurisdiction of		(IRS Employer
incorporation)		Identification No.)

1 Fanatical Place

City of Windcrest

San Antonio, Texas 78218

(Address of principal executive offices, including zip code)

(210) 312-4000

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

On September 16, 2014, Taylor Rhodes was appointed Chief Executive Officer of Rackspace Hosting, Inc., (the “Company”). Prior to his appointment as Chief Executive Officer, Mr. Rhodes, 43, served as President of the Company from January of 2014 and will retain such role in addition to his role as Chief Executive Officer. Mr. Rhodes acted as the Chief Customer Officer from September 2013 and, prior to that, was the Senior Vice President and Managing Director of Rackspace International from December 2011 to September 2013. Mr. Rhodes also acted in other leadership positions at the Company since joining in July 2007, including leading the sales and support organization which focused on large enterprises. There are no family relationships between Mr. Rhodes and any director or executive officer of the Company, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

As part of his appointment as Chief Executive Officer, Mr. Rhodes and the Company entered into an offer letter (the “Offer Letter”) setting forth a number of revisions to Mr. Rhodes' existing employment agreement. Pursuant to the Offer Letter, Mr. Rhodes’ base compensation will be set at $700,000 per year, with a target bonus amount under the Company’s non-equity incentive plan of 115% of his base compensation. In addition, Mr. Rhodes is expected to receive equity awards pursuant to the Company’s 2007 Amended and Restated Long-Term Incentive Plan which will have a total accounting value as of the date of grant of approximately $6,000,000, subject to final approval by the Compensation Committee.

The Offer Letter also provides that if Mr. Rhodes’ employment is terminated for reasons other than cause, as defined therein, or by Mr. Rhodes for good reason, as defined therein, then he shall be entitled to receive continued severance pay equal to six months of his base salary and full payment of his target bonus payable over such six month period and would also be subject to a non-compete over that same period. If such termination for reasons other than cause or by Mr. Rhodes for good reason occurs within the period beginning 3 months prior to and ending 12 months following a change in control, as defined therein, then he shall be entitled to receive a lump sum payment equivalent to two years of base salary and target bonus.

On September 16, 2014, the board of directors of the Company (the “Board”) appointed Taylor Rhodes as a Class II Director. His term on the Board shall expire at the 2016 Annual Meeting of Stockholders. There is no arrangement or understanding between Mr. Rhodes and any other persons pursuant to which Mr. Rhodes was appointed as a director. Mr. Rhodes will not serve on any committees of the Board. Mr. Rhodes will receive no additional compensation for his service on the Board.

In connection with the appointment of Mr. Rhodes as Chief Executive Officer, Graham Weston has resigned as Chief Executive Officer as of the effectiveness of Mr. Rhodes’ appointment. Mr. Weston will continue to serve as a member of the Board and as Chairman of the Board.

On September 16, 2014, the Company issued a press release announcing the appointment of Taylor Rhodes as Chief Executive Officer and as a member of the Board. A copy of the press release is attached hereto as Exhibit 99.1.

Item 8.01. Other Events

On September 16, 2014, the Company issued a press release announcing that, after a comprehensive review process, the Board has decided to end its formal evaluation of alternatives that would result in the Company being acquired and continue to operate as a standalone company. A copy of the press release is attached as Exhibit 99.2.

On September 16, 2014, in connection with the issuance of the press release, the Company held a conference call to discuss the press release.

-2-

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

99.1 Press Release of Rackspace Hosting, Inc., dated September 16, 2014, announcing the appointment of Taylor Rhodes as Chief Executive Officer and a member of the Board of Directors.

99.2 Press Release of Rackspace Hosting, Inc., dated September 16, 2014, announcing end of formal evaluation of strategic proposals.

-3-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



			Rackspace Hosting, Inc.
Date:	September 17, 2014	By:	/s/ Karl Pichler
			Karl Pichler
			Chief Financial Officer and Treasurer

-4-

Rackspace Names Taylor Rhodes as CEO and a Member of the Board of Directors

SAN ANTONIO - Sept. 16, 2014 - Rackspace® (NYSE:RAX), the #1 managed cloud company, today announced that its board of directors has named Taylor Rhodes to be the company’s chief executive officer as well as a member of the board, effective immediately. Rhodes is a Rackspace veteran who has served in a variety of leadership positions within the company since 2007, including several roles directly responsible for delivering Rackspace’s renowned Fanatical Support® to customers globally. He retains his previous role as president and remains responsible for the company’s operations worldwide. Rackspace co-founder, Graham Weston, who has served as CEO and chairman since February, now is non-executive chairman of the board.

“Our board conducted a thorough search of highly qualified internal and external candidates, and we are confident that Taylor is the right person to lead Rackspace through its next phase of growth,” said Sam Gilliland, lead independent director of the Rackspace board. “Throughout his tenure, Taylor has proven himself to be an inspiring leader, a strategic thinker and a committed Racker. On behalf of the board, I look forward to working closely with Taylor as we embark on our next chapter together. I would also like to thank Graham for his leadership during this transition period. As always, he guided us with vision and passion.”

Weston added, “With each new role and challenge that Taylor has taken on, he has demonstrated inspiring leadership, delivered results and displayed passion for Rackspace and our customers. Importantly, he has played a critical role in the development and execution of the company’s strategy to renew its focus on managed cloud market leadership, actions which are driving the reacceleration of the company’s results and underpinning our positive outlook.”

“I would like to thank the board for its confidence in me, and Graham for providing the leadership that has helped Rackspace become the #1 managed cloud company,” said Rhodes. “Graham has been a valued mentor to me, and I look forward to his continued guidance and advice. I am confident that we are in the early days of massive transformation of the IT industry and we are well-positioned to win market share and customers that value our expertise.”

About Taylor Rhodes

Rhodes joined Rackspace in 2007 to lead the business unit responsible for delivering Fanatical Support to more than 1,000 of the company’s largest and most complex customers. Previously, Rhodes served as president since February. Prior to that, he was senior vice president and chief customer officer responsible for Rackspace’s global sales and Fanatical Support organizations. He worked closely with the product and marketing teams to develop the company’s differentiated managed services strategy, and was specifically responsible for leveraging the power of the hybrid cloud, open and standard technologies, and Fanatical Support to acquire new customers and grow relationships with existing customers.

Rhodes also served as senior vice president and managing director, international, where he was responsible for developing the company's strategic priorities and creating business growth across international markets in Europe, Asia and Australia. Before that, he helped launch Rackspace Enterprise Services, a business unit that accelerated the company’s expansion of services to larger customers.

Before joining Rackspace, Rhodes worked at EDS in a series of progressively more challenging leadership roles, managing end-to-end relationships with large global customers. He served in the U.S. Marine Corps as an infantry officer and holds an MBA degree from The University of North Carolina at Chapel Hill.

-1-

Conference Call and Webcast

Rackspace's executive management will host a conference call to discuss today’s announcements starting today at 4:30 p.m. ET. To access the conference call from the United States and Canada, please dial 800-750-5849, from the United Kingdom, please dial 0800-496-0830, and from Hong Kong, please dial 800-900-872. A live webcast and a replay of the conference call will be available on Rackspace's website, located at ir.rackspace.com.

About Rackspace

Rackspace (NYSE: RAX) is the #1 managed cloud company. Its technical expertise and Fanatical Support® allow companies to tap the power of the cloud without the pain of hiring experts in dozens of complex technologies. Rackspace is also the leader in hybrid cloud, giving each customer the best fit for its unique needs -- whether on single- or multi-tenant servers, or a combination of those platforms. Rackspace is the founder of OpenStack®, the open-source operating system for the cloud. Headquartered in San Antonio, Rackspace serves more than 200,000 business customers from data centers on four continents. It ranks 29th on Fortune's list of 100 Best Companies to Work For. For more information, visit www.rackspace.com.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results of Rackspace Hosting could differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements concerning expected operational and financial results, long-term investment strategies, growth plans, expected results from the integration of technologies and acquired businesses, or the performance or market share relating to products and services; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include infrastructure failures; the deterioration of economic conditions or fluctuations, disruptions, instability or downturns in the economy; the effectiveness of managing company growth; technological and competitive factors; regulatory factors; and other risks that are described in Rackspace Hosting's Form 10-K for the year ended December 31, 2013, filed with the SEC on March 3, 2014, and in Rackspace Hosting’s Form 10-Q for the quarter ended June 30, 2014. Except as required by law, Rackspace Hosting assumes no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Media Contact:

Brandon Brunson

210-312-1357

brandon.brunson@rackspace.com

-2-

Rackspace Ends Formal Evaluation of M&A Transactions;

Focus Remains on Managed Cloud Market Leadership

Names Taylor Rhodes CEO and Member of the Board

SAN ANTONIO - Sept. 16, 2014 - Rackspace® (NYSE:RAX), the #1 managed cloud company, today announced it has ended its evaluation of alternatives that would result in Rackspace being acquired. The company declared its commitment to remain independent and announced Taylor Rhodes as CEO to lead and drive its managed cloud strategy.

As previously disclosed in a Form 8-K filed with the Securities and Exchange Commission on May 15, Rackspace had been approached by multiple parties who expressed interest in exploring a strategic relationship, ranging from partnership to acquisition. The board retained Morgan Stanley and Wilson Sonsini Goodrich & Rosati to facilitate a comprehensive review to maximize value for shareholders, customers, and employees. After a comprehensive review, the board decided to terminate M&A discussions. Based on Rackspace’s reaccelerated revenue growth and its potential trajectory for the coming year, the board concluded the company is best positioned to maximize shareholder value by executing its strategy as the #1 managed cloud company.

"We ran a thorough process under the direction of our board of directors, independent advisors, and a Strategic Transaction Committee of the Board," said Graham Weston, Rackspace co-founder and chairman. “In this process we talked to a diverse group of interested parties and entertained different proposals. None of these proposals were deemed to have as much value as the expected value of our standalone plan. We concluded that the company is best positioned to drive value for shareholders, customers and Rackers through the continued execution of its strategic plan to capitalize on the growing market opportunity for managed cloud services.”

“The board also considered a share repurchase program and determined that, based on the company’s significant opportunities, it is prudent to maintain flexibility at this time to ensure that the appropriate investments can be made to drive our strategy forward. We will continue to evaluate the benefits of implementing a buyback program in the future,” continued Weston.

As detailed in a separate press release issued today, the Rackspace board also named company president Taylor Rhodes to chief executive officer and member of the board, effective immediately. Graham Weston, co-founder, and chairman of the board, who has been serving as CEO of Rackspace since February, will continue to serve as non-executive chairman of the board.

“As a seven year leader of Rackspace, Taylor brings significant experience, dedication and passion to the role of CEO. He was instrumental in the development and execution of Rackspace’s managed cloud strategy that is now delivering strong results,” said Weston. “We are confident that under his leadership, and through the execution of our strategy, Rackspace is well positioned to lead in the large and growing managed cloud category.”

Strategic Plan to Drive Enhanced Value

Earlier this year, Rackspace announced a renewed focus on increasing share in the managed cloud market. Rackspace is targeting businesses and developers that trust it to manage not only their cloud infrastructure but also the many complex tools and applications that run on top of that infrastructure, including the latest databases and ecommerce platforms. By delivering expertise in these highly specialized areas, Rackspace enables customers to stay fast and lean and to focus on their core business.

-1-

This strategy has gained traction with customers and industry experts. Recent accomplishments include:


•	For the first time in Rackspace history, the company added more than $20 million of new revenue in a single quarter during the second quarter of 2014.


•	Sequential revenue growth of 4.3 percent, on a constant currency basis, in the second quarter was the highest rate of growth generated since the fourth quarter of 2012. Revenue growth in the multi-tenant public cloud segment accelerated to 7.5 percent sequentially.


•	Rackspace’s leadership in the managed cloud market category was affirmed by Gartner Inc., a leading independent analyst for the IT industry, in its recent Magic Quadrant for Cloud Enabled Managed Hosting.

“Throughout our history, Rackspace has set the standard for managed services in our industry. We are famous for delivering Fanatical Support to over 200,000 customers globally,” said Rackspace CEO and President Taylor Rhodes. “Our underlying strength, as evidenced by our strong second quarter results and the recent traction with customers and industry experts, gives us great confidence in the future. In fact, we remain on track to have a strong third quarter and second half of the year and are comfortable with the guidance ranges we have provided. We are more focused than ever on expanding our leadership of the managed cloud market, and we think the best way to do that is by remaining an independent company.”