Thus, cloud servers deployed in this manner would only consider the first eight characters of the root password significant, potentially allowing an attacker with simple knowledge of this weakness and the system's hostname to remotely log in via SSH as root. As hostnames are easily determined by a number of means, the potential for damage is significant. Additionally, evidences exists that Rackspace is storing customer root passwords internally in a recoverable format.
These issues were reported to the company, as described in the previously published Rackspace cloud security pre-advisory. To date, Rackspace has apparently mitigated some of the issues for newly deployed instances, but serious questions remain regarding the integrity of servers in the wild which were deployed using the flawed methods. As the company is a large hosting provider with well known IP space, and the time at which these problems were first manifested is unknown, the number of vulnerable servers could be significant."