Dec. 12, 2014, 9:23 AM
- Though Rackspace's (NYSE:RAX) decision to differentiate itself in a very competitive cloud infrastructure market by sticking to its historical focus on "fanatical service" is a sound one, the "steady inherent growth presented by the service market has been more than adequately priced into the stock," says D.A. Davidson's Mark Kelleher, downgrading to Underperform.
- His $40 target is equal to 7x Davidson's 2016 EBITDA forecast of $793M. Rackspace was up 77% from its May low of $26.18 going into today.
Nov. 20, 2014, 5:17 PM
- Rackspace (NYSE:RAX) founder/chairman Graham Weston has bought $2.5M worth of shares on Tuesday at an average price of $42.75, and plans to buy up to $2.5M more over the next year through a 10b5-1 trading plan.
- Weston's move comes in the wake of last week's big post-earnings gains. Rackspace is making new 52-week highs in AH trading.
Nov. 13, 2014, 11:45 AM
- Todd Cione, formerly Rackspace's (RAX +1.9%) SVP of Americas sales, is now the company's chief revenue officer. Cione's new job puts him in charge of "the operations of the Americas sales and global marketing organizations." (PR)
- Before joining Rackspace last year, Cione spent 15 years at Microsoft. News of his promotion comes a couple days after Rackspace blasted off in response to its Q3 numbers and buyback announcement.
Nov. 11, 2014, 4:43 PM
- Rackspace's (NYSE:RAX) Q3 numbers show the company "can carve out a niche" in a very competitive cloud infrastructure market by focusing on service quality, thinks Credit Suisse, hiking its target to $45. The firm also argues the re-acceleration seen in Rackspace's revenue growth points to improved execution.
- Likewise, Oppenheimer asserts Rackspace appears to be achieving "a customer care niche in hybrid cloud that is defensible." It recommends buying if shares fall again in response to Amazon price cuts; with Google having just slashed prices, Amazon might respond at this week's AWS re:Invent conference.
- Canaccord, however, is still cautious. "Although the management transition has been executed better than we had expected with respect to the Q3/14 results, we are not convinced we are on a complete road to recovery and that the countervailing trends of intense competitive pressures, contrasted with the strong secular demand, warrant a HOLD rating."
- Shares made new 2014 highs today. They're still well below an early-2013 high of $81.36.
- Prior Rackspace coverage
Nov. 11, 2014, 9:17 AM
Nov. 10, 2014, 4:46 PM
- Along with its Q3 results, Rackspace (NYSE:RAX) announces it's launching a $500M buyback program. At current levels, the program is good for repurchasing 9% of outstanding shares.
- Rackspace had $349M in cash to finance buybacks with at the end of Q3, and $31M in debt. The buyback will be kicked off with a $200M accelerated share repurchase.
- RAX +2.9% AH. Q3 results, guidance/details.
Nov. 10, 2014, 4:28 PM
- Rackspace (NYSE:RAX) expects Q4 revenue of $469M-$476M, below a $476.5M consensus. Forex is expected to have a $5M revenue impact.
- Q3 adjusted EBITDA margin was 34.5%, +240 bps Q/Q and +220 bps Y/Y, above guidance of 31%-33%, and well-received in light of the cloud infrastructure (IaaS) price pressure Rackspace has seen. Q4 guidance is at 33%-35%. A recent pricing overhaul is likely helping.
- Adjusted free cash flow was $41.5M, above net income of $25.7M. Capex still amounted to $117M (a steep 25% of revenue).
- Gross margin rose 180 bps Q/Q and 170 bps Y/Y to 68.9%. As a result, GAAP costs/expenses were 91.2% of revenue, down from 92.3% in Q2 and 92.9% a year ago.
- Dedicated cloud (Web hosting) revenue +14% Y/Y to $319.6M. Public cloud (IaaS) revenue +29% to $140.2M.
- Servers deployed rose 3% Q/Q to 110.4K, and average revenue/server rose by $30 to $1,405. Churn rose slightly to -0.6%, and net upgrade rate fell slightly to 1.4%.
- Q3 results, PR
Nov. 10, 2014, 4:11 PM
Nov. 9, 2014, 5:35 PM
Oct. 30, 2014, 11:17 AM
- In addition to posting mixed Q3 results, Equinix (NASDAQ:EQIX) is guiding for Q4 revenue of $627M-$631M, below a $642M consensus.
- However, the data center owner reported a 3.4K Q/Q increase in net billable cabinets for Q3, a record figure and (as noted on the CC) 70% above Equinix's 4-quarter average. Total billable cabinets stand at 96.1K - 44.9K in North America, 32.2K in Europe, 19K in Asia-Pac.
- Likewise, cross-connects rose by 5.7K to 141.2K, and exchange ports by 143 to 2,557. Total customers rose by 60 to 4,700, with the termination rate falling to 1.9% from 2.7% in Q2 and 2.5% a year ago.
- Gross margin was 68%, flat Q/Q and Y/Y. Adjusted EBITDA margin was 46% vs. 45% in Q2 and 46% a year ago. $43M was spent on buybacks. Equinix ended Q3 with $501M in cash, and $4B in debt.
- Equinix is guiding for full-year adjusted discretionary free cash flow of $590M-$620M, and adjusted funds from operations (AFFO) of greater than $745M. REIT approval is still expected by year's end.
- Several data center colocation, Web hosting, and interconnection services firms are also higher on a day the Nasdaq is down 0.5%. RAX +1.5%. INAP +3.5%. DLR +1.3%. CONE +1.4%.
- Q3 results, PR, slides (.pdf), datasheet (.pdf)
Oct. 7, 2014, 4:10 PM
- With the Nasdaq falling 1.6%, H-P (HPQ -4.5%) gave back nearly all of the gains it saw yesterday following its split announcement, in spite of largely favorable reactions from the sell-side and others.
- In addition to arguing H-P could be less efficient as two companies (both due to higher overhead and less negotiating power with suppliers), deal skeptics have argued a breakup doesn't address either half of the company's growth challenges.
- VC Roger McNamee: "HP has gone from having two boat anchors tied together, each trying to float in the water, to two separate boat anchors trying to float in the waters ... The only thing I’m certain about on this deal is that the executive compensation will be absolutely terrific."
- Meanwhile, Rackspace (RAX +1.8%) finished higher amid speculation the enterprise IT half of H-P could bid for the company. Rackspace called off its attempts to find a buyer last month, and re/code reported in August H-P is uninterested.
- Also: H-P has sold its 40% stake in UAE-based IT services firm Injazat Data Systems for an undisclosed sum. With H-P having reportedly attempted to sell its entire IT services unit (among other businesses) before deciding on a breakup, this could be a sign of things to come.
Sep. 17, 2014, 12:45 PM
Sep. 17, 2014, 11:47 AM
- The lack of a sale isn't as surprising or disappointing as Rackspace's (RAX -16.1%) decision not to launch a buyback, says Cowen's Colby Synesael, nevertheless reiterating an Outperform rating on the stock. The company, he says, has more than enough capacity to retain financial flexibility and repurchase shares, a thought he expects other investors will echo to management in the coming weeks.
- Blair's Jim Breen - who also rates the stock Outperform - is less disappointed in the lack of buyback and calls Rackspace's decision to stay independent "prudent" given accelerating revenue. "Further, we believe that Rackspace’s chief competitor, Amazon Web Services, may become less aggressive with its price decreases after Amazon’s second-quarter results exhibited a year-over-year decline in other revenue, which is a proxy for its cloud business."
- Needham's Richard Kugele - who has a Hold rating on the stock - wasn't surprised by the lack of a sale. He's believed from the start there was a disconnect between what the board wanted and what buyers "in the new cloud landscape would bear."
- One downgrade comes from Credit Suisse, which cuts to a Sell.
- Previously: Rackspace can't find a buyer; -16.5% after-hours
Sep. 17, 2014, 9:15 AM
Sep. 16, 2014, 5:35 PM
Sep. 16, 2014, 4:32 PM
- "Based on Rackspace's (NYSE:RAX) reaccelerated revenue growth and its potential trajectory for the coming year, the board concluded the company is best positioned to maximize shareholder value by executing its strategy as the #1 managed cloud company."
- A share repurchase plan was also nixed as the company wants to maintain flexibility.
- Graham Watson is out as CEO, and Taylor Rhodes has been appointed to replace him and to join the board. Watson is now non-executive chairman. Rhodes joined Rackspace in 2007 and has been president since February.
- Shares -16.5% AH
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