Rackspace Technology Inc. is laying off 750 workers. The impact at its San Antonio headquarters, seen here, is unclear.
Sam Owens/San Antonio Express-News
Rackspace Technology Inc. is laying off about 750 workers as it continues to adjust its business amid the rise of artificial intelligence.
The San Antonio-based cloud computing company announced the workforce realignment impacting 15% of its 5,000-person global staff in a filing with the Securities and Exchange Commission.
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It appears to be the largest-ever round of layoffs for the 28-year-old company, which has workers in 22 countries. Rackspace hasn’t said how many of its 500 San Antonio workers are losing their jobs.
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The firm has 1,800 people in North America; 800 in Europe, the Middle East and Africa; and 2,400 across Asia. Seventy percent of its staff work remotely, Rackspace has said.
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Impacted workers were notified about June 10 and will be departing over the next six months.
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The cuts were driven by Rackspace moving away from “certain legacy service delivery functions,” mostly within its public cloud business unit, as well as geographic moves “in favor of redeploying resources toward its enterprise AI buildout,” the filing said.
Rackspace estimates the cuts will cost between $14 million and $19 million in severance payments, healthcare benefits and other termination-related costs but expects the layoffs will save it between $75 million and $85 million annually beginning next year.
FROM 2021: San Antonio-based Rackspace cuts 10 percent of workforce
The company said it intends to reinvest the savings “in its highest-growth product and service areas, including forward-deployed engineering, AI solutions delivery, and enterprise AI infrastructure buildout.”
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It also left the door open for more layoffs, saying it “may also implement additional measures in connection with its ongoing strategic transformation.”
Rackspace had not filed a Worker Adjustment and Retraining Notification notice with the Texas Workforce Commission as of Monday. Such notices are required for mass layoffs or closures impacting Texas workers.
Last month, the company reported its first profitable quarter in two years amid a focus on helping its customers in regulated industries — such as healthcare, financial services, government, defense, energy and telecommunications — incorporate AI into their networks.
The offerings are part of Rackspace’s private cloud business, which provides dedicated hardware for each customer. It’s more secure and customizable than the company’s public cloud, in which multiple accounts reside on shared infrastructure often with large providers such as Amazon Web Services, Azure and Google Cloud.
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In the first quarter, private cloud revenue was $235 million, down from the $250 million reported last year. Public cloud revenue in the first quarter was $443 million, up from $416 million a year ago.
While public cloud revenue still eclipses private cloud, Rackspace sees more room for growth in the private cloud business since it also includes delivering and operating hardware in addition to network management.
As part of its move into AI, Rackspace partnered with Advanced Micro Devices Inc., of Santa Clara, Calif., to run and manage AI systems for customers.
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Under the agreement, Rackspace will handle everything from setup to daily operations, which it says is simpler and safer than other models where customers rent computing power and are responsible for managing their own AI systems.
Last week, the companies finalized a deal for AMD to provide 30 megawatts of compute across Rackspace’s 30 global data centers beginning later this year.
The companies didn’t disclose the value, but it’s likely in the hundreds of millions of dollars, since comparable AI-infrastructure deals range between $18 million and $67 million per megawatt.
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Rackspace did not respond to a request for comment.