Private equality bought Rackspace out. Layoffs are part of that playbook. They basically pump cash in to grow sales, while cutting costs, so they can chop it up and sell it off for a multiple of what they paid for it.
They usually borrow money at really high leverage to buy the company so they risk very little of their own capital. Then they cut anything and everything to minimize costs (and choke off the ability to compete in the future) then dump the carcass(es) on whatever suckers they can find because they made the balance sheet look better temporarily.
Banks line up to lend them money because there is a never-ending supply of suckers and these firms usually manage to find one before the inevitable crash and burn.
Why is it so obvious to you, but not these other people? How does this charade perpetuate? Maybe there is value in there somewhere?
Buyers always think that they have some insight about the business that can materialise some yet-unrealised potential. You've probably done it yourself a few times, "if only Company X did this and that, instead of what they're doing now -- they'd make loads!". Everyone knows PE don't know how to run businesses beyond the basics, so buyers will always see untapped potential. That makes for high prices.