Rackspace lower after refusing to match rivals' latest cloud cuts

|About: Rackspace Hosting, Inc. (RAX)|By:, SA News Editor

"We do not base our prices on competitors' rental rates for raw infrastructure. Rackspace (RAX -2.4%) has for 15 years charged premium prices for premium service, expertise, performance and reliability," writes CTO John Engates after being asked by The Register if his company will match the huge cloud infrastructure (IaaS) price cuts recently announced by Google, Amazon, and Microsoft.

Google's cuts were accompanied by a new pricing scheme that yields automatic price cuts for reserved capacity whenever spot pricing is lowered. Worries about the market share and margin impact of competitor pricing have pressured Rackspace's shares for some time.

The Register observes Rackspace charges 143% more than Amazon ($0.68/hours vs. $0.28/hour) for a comparable performance-optimized computing instance featuring SSD storage. A Google instance lacking SSD storage matches Amazon's pricing.

Rackspace's public cloud revenue, including revenue from its OpenStack platform, rose 34% Y/Y in Q4, and equaled 29% of its total revenue. Synergy Research estimates the total market for IaaS and cloud app platform (PaaS) services rose 52% in Q4. Amazon continues to have a dominant IaaS share.