Cloud Sites was a business line of Rackspace that sold cloud computing to designers and developers who would then create and maintain websites for clients using the online tool.


Kristen Mosbrucker
Nov 10, 2016

Selling bundled cloud hosting capacity to other information technology professionals for their customers’ websites had a multi-million price tag — according to a deal between Rackspace Hosting Inc. and Liquid Web Inc. that closed in August but outlined in regulatory documents disclosed this week.

Michigan-based Liquid Web, a competitor of Rackspace that sells managed cloud hosting to businesses, will pay $39 million to acquire Cloud Sites — a U.S. Securities and Exchange Commission filing shows.

Cloud Sites was a business line of Rackspace that sold cloud computing to designers and developers who would then create and maintain websites for clients using the online tool.

Liquid Web representatives did not respond to requests for comment for this story before deadline.

About $31.4 million in cash was paid by Liquid Web to Rackspace on Aug. 25. Then $3.5 million went into escrow and the remaining $4 million is expected to be transferred at the end of an 18-month transition period — after data center equipment is released.

Both Rackspace and Liquid Web built and maintain data centers around the world.

During the transfer, Liquid Web will continue to pay monthly for cloud hosting for its new customers to Rackspace. Overall, the local technology company reported a pre-tax gain of $12.5 million from the deal after net book value of assets and transaction costs are taken into consideration. Liquid Web will also become a reseller of Rackspace’s email product.

The deal included intellectual property tied to Cloud Sites, the underlying technology of which is planned to boost Liquid Web’s WordPress support offering. That’s a direct move to usurp market share from Austin-based WP Engine, which has an office in San Antonio.

WP Engine may also be competing with Liquid Web for employees, since the company plans to expand its employee footprint to 100 people by 2020 in the Alamo City.

Similar to Rackspace's claim of providing "fanatical support," Liquid Web offers "heroic" customer service.

In exchange for retaining 57 jobs and creating 43 more in the coming years, Liquid Web was awarded $225,000 from the city of San Antonio as an economic incentive and $150,000 from Bexar County this fall.

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