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Rackspace literally decimates workforce: One in ten staffers let go this week

85% of those jobs will be rehired, just in cheaper countries

Updated Around 10 per cent of Rackspace staff, predominantly in the US it seems, got an unwelcome email this week informing them they were being let go.

Not that the work they do isn't needed. In an paperwork submitted to the SEC on Wednesday, Rackspace disclosed that 85 per cent of the positions being cut will be backfilled by workers in "offshore service centers." That'll be where wages are lower and labor laws more lax, presumably.

"The rebalance in workforce is a component of a broader strategic review of the Company’s operations that is intended to more effectively align the Company’s resources with its business priorities in high growth areas," Rackspace said.

"The Company estimates that it will incur expenses of approximately $70m to $80m related to the restructuring plan to be incurred over the next 12-24 months with the majority of expenses incurred in the next 12 months."

The cloudy biz also announced a reshuffle in management. COO Subroto Mukerji is being shifted to the role of president, and CFO Amar Maletira will take over most of Mukerji's responsibilities. In other words, the beancounters are ruling the roost.

According to Texas Public Radio, around 700 staff were let go on Thursday, around two thirds of them employees at the firm's headquarters in San Antonio.

A source familiar with the layoffs told The Register there were fewer than 100 cuts in the UK, and people have been let go worldwide. Rackspace employs 7,200 globally, and told the SEC it was dumping approximately one in ten employees, informing them of the changes on July 22.

"As part of an internal realignment from supporting dedicated servers and on-premises and in-datacenter customers to cloud consulting, Rackspace has announced internally that they are eliminating a number of roles in the UK," our tipster told us. "Redundancies are also being made in the US and other countries, but no solid count was given."

Apollo Global Management bought Rackspace in 2016, took it private, and layoffs followed.

Last year Apollo took Rackspace public again, in part to pay off the debt it accumulated buying the cloud management company in the first place. CEO Kevin Jones told investors in May he is pushing for a "higher offshore mix across the company," in the future.

In its latest full-year financial results, released in February, Rackspace banked a net loss of $245.8m in 2020, versus a $102.3m loss in 2019, from sales of $2.7bn, up 11 per cent year-on-year. ®

Updated to add

"We continue to hire for roles that are needed to accelerate our business and serve our customers around the globe," a Rackspace spokesperson told The Register. "We currently have more than 700 open roles for top talent in the industry."

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