Thu, Nov. 19, 5:21 PM
- Google (GOOG, GOOGL) has bought Bebop Technologies, a stealth-mode startup that has been working on an enterprise cloud app development platform, and which was founded by VMware co-founder and Google board member Diane Greene.
- Greene will now lead a new unit containing all of Google's cloud businesses, including Google Apps (productivity apps), Google for Work (custom versions of Google products for enterprises), and the Google Cloud Platform (cloud infrastructure and app platform services). CEO Sundar Pichai declares the move will "bring together product, engineering, marketing and sales and allow us to operate in a much more integrated, coordinated fashion."
- Pichai provides some vague details regarding Bebop: "[B]ebop is a new development platform that makes it easy to build and maintain enterprise applications ... bebop and its stellar team will help us provide integrated cloud products at every level: end-user platforms like Android and Chromebooks, infrastructure and services in Google Cloud Platform, developer frameworks for mobile and enterprise users, and end-user applications like Gmail and Docs."
- The move comes shortly after Google SVP Urs Hölze proclaimed (in remarks that may or may not have been blessed by Google's brass) the company's Cloud Platform revenue could surpass its ad revenue in five years. With 90% of Google's Q3 revenue coming from ads (and much of the rest from hardware, Google Play, etc.), that could prove a tall order.
- Rackspace (NYSE:RAX) fell 6.1% in regular trading, with Hölze's remarks having been mentioned as a potential culprit. Stifel defended Rackspace, arguing the remarks were misunderstood and that Rackspace will eventually strike a deal to provide managed services for Google's cloud offerings, much as it has with Amazon and Microsoft.
- Synergy Research estimates Google is the 4th-largest player in the in the broader market for public, private, and hybrid cloud services, trailing IBM, Microsoft, and 800-lb. gorilla Amazon. The company has tried to differentiate its cloud offerings by emphasizing developer needs; the Bebop acquisition fits with that effort.
Tue, Nov. 10, 12:48 PM
Tue, Nov. 10, 9:13 AM
Mon, Nov. 9, 7:11 PM
- Rackspace (NYSE:RAX) spent $250M on buybacks in Q3. The company is three months removed from upping its buyback authorization to $1B, and promising to buy back at least $500M worth of shares in 6-9 months.
- Adjusted EBITDA margin was 34.9%, up 180 bps Q/Q and 40 bps Y/Y, and above guidance of 33%-34%. Q4 guidance is still at 33%-34%. Adjusted free cash flow rose 9% Y/Y to $45.2M, with adjusted EBITDA growth offsetting a 9% increase in capex to $127.7M (a healthy 25% of revenue).
- GAAP costs/expenses rose 8% to $452.4M. Average monthly revenue per server rose by $28 Q/Q and $39 Y/Y to $1,444. Servers deployed rose 2% Q/Q and 7% Y/Y to 118,654.
- Rackspace's $350M debt offering consists of senior notes due 2024. A portion of the proceeds will be used to repay credit facility debt; the remainder will be used for general corporate purposes that may include buybacks. Rackspace ended Q3 with $213.5M in cash, and $25.1M in debt.
- Shares have risen to $29.20 after hours, after dropping 4.2% in regular trading. BofA/Merrill's pre-earnings upgrade is looking good.
- Q3 results/Q4 guidance, PR
Mon, Nov. 2, 10:08 AM
- Stating fundamentals appear to be stabilizing, BofA/Merrill's Scott Shiao has upgraded Rackspace (NYSE:RAX) to Buy ahead of its Nov. 9 Q3 report, and set a $38 target.
- Shiao adds an LBO analysis indicates upside, and that capex cuts could yield a higher valuation. Rackspace ended a strategic review last year after failing to strike a deal,
- Shares still -40% YTD. They sold off in August in response to a Q2 sales miss and light guidance. Worries about competition from Amazon and other major cloud infrastructure providers has weighed.
Mon, Oct. 5, 12:29 PM
- Rackspace (NYSE:RAX) is flying higher on a day the Nasdaq is up 1.1%. 1.92M shares have been traded thus far vs. a 3-month daily average of 2.545M.
- Rackspace is widely expected to announce a partnership with bigger rival Amazon Web Services this week, at the latter's AWS re:Invent conference (runs from Tuesday-Friday). Much like Rackspace's July deal with Microsoft, the agreement is expected to cover Rackspace managed support and monitoring services for AWS deployments.
- Shares closed on Friday just $0.62 above a 52-week low of $23.65. 10.7M shares (nearly 11% of the float) was shorted as of Sep. 15.
Wed, Aug. 26, 4:21 PM
- The Nasdaq has closed its latest ultra-volatile day up 4.2%. Chip stocks, hit hard in recent weeks amid China/inventory concerns, were among the standouts (SOXX +5%) during the rally: Big gainers included Nvidia (NVDA +7.5%), Skyworks (SWKS +6.9%), Qorvo (QRVO +5.9%), Xilinx (XLNX +6.3%), Analog Devices (ADI +7.1%), Linear (LLTC +6.1%), SanDisk (SNDK +7.4%), ON Semi (ON +6.2%), and Cavium (CAVM +5.6%).
- Cybersecurity plays and various other enterprise tech names also did well. Standouts included HP (HPQ +5.5%), Palo Alto Networks (PANW +6%), Rackspace (RAX +9.8%), Red Hat (RHT +5.9%), KEYW (KEYW +8.1%), Brocade (BRCD +5.6%), ShoreTel (SHOR +5.7%), Violin Memory (VMEM +14.7%), and Rapid7 (RPD +7.2%).
- In addition to HP, tech large-caps turning in big gains included Apple (AAPL +5.7%) Microsoft (MSFT +5.5%), Google (GOOG +7.7%), and Intel (INTC +5.5%). Google benefited from a Goldman upgrade.
- KEYW announced a CEO change yesterday afternoon. HP and Brocade are adding to last week's post-earnings gains. Skyworks/Qorvo peer Avago has posted an FQ3 beat after the close.
Mon, Aug. 10, 4:25 PM
- Rackspace (NYSE:RAX) uses its Q2 report to announce the company's buyback authorization has been hiked to $1B; a $500M buyback was launched last November, of which $200M has been used. At least $500M worth of shares will be repurchased in 6-9 months.
- The program will be financed with a mixture of existing cash, future cash flows, and debt. Rackspace now plans to have a debt level equal to 1.5x annual EBITDA, and expects to achieve it in the next 24 months.
- Guidance: Q3 guidance is for revenue to rise 2%-3.5% Q/Q on a constant currency basis; consensus is for revenue to rise 4% Q/Q in dollars to $511.1M. Q4 guidance is also for 2%-3.5% Q/Q constant currency growth, and full-year guidance is for 12%-14% Y/Y constant currency growth; the 2015 revenue growth consensus (in dollars) is at 12.2%. Adjusted EBITDA margin guidance for all 3 periods is 33%-34% (compares with Q2's 33.1%, +100 bps Y/Y).
- As previously indicated, Rackspace is no longer breaking out its dedicated cloud (Web hosting) and public cloud (IaaS) revenue. Average revenue/server rose by $4 Q/Q and $41 Y/Y to $1,416. Servers deployed rose 2% Q/Q and 8% Y/Y to 116,329.
- Cost controls helped EPS meet estimates in spite of a revenue miss: GAAP costs/expenses rose 7% Y/Y to $435.8M, less than revenue growth of 11%. Ahead of the new capital structure policy, Rackspace ended Q2 with $317M in cash, and just $7M in debt.
- Shares have risen to $33.11 in AH trading.
- Q2 results, PR
Tue, Jul. 14, 1:13 PM
- A day after Rackspace (NYSE:RAX) announced a services partnership with Microsoft related to Azure, shares are rallying in response to a CRN report stating a similar deal with Amazon Web Services (NASDAQ:AMZN) is close.
- CRN states a channel partner for both Rackspace and Amazon "approached his company with an offer to participate in a beta program in which Rackspace would manage and provide support for his customers hosting workloads in Amazon's cloud." The source: "They are going to wrap their managed 'Fanatical Support' around AWS and essentially become an Amazon reseller."
- AWS had revenue of $5.16B over the 12 months ending March 31, and (per Synergy Research) still controls nearly 30% of the global cloud IaaS/PaaS market.
- Rackspace is now up 8.5% over the last two days. Shares are still down 17% YTD.
Mon, Jul. 13, 11:52 AM
- Rackspace (RAX +3.6%) is partnering with Microsoft (NASDAQ:MSFT) to provide managed support, monitoring, and "architectural guidance" services to companies looking to deploy Microsoft's Azure cloud infrastructure/app (IaaS/PaaS) platform, which supports public, private, and hybrid cloud deployments.
- The companies will also offer a hybrid cloud solution that combines Azure, Rackspace's private cloud solution, and Microsoft's Cloud Platform (a collection of products for deploying private clouds).
- Rackspace, whose IaaS offerings compete with Azure and has often called its "fanatical" customer support as a differentiator, is offering both an Azure infrastructure and support bundle (effectively acts as a reseller arrangement), as well as a support-only option. The services will initially be provided to U.S. clients; international availability arrives in 2016.
- Azure is believed to be the world's second-largest IaaS/PaaS platform, trailing only Amazon Web Services.
Tue, May 12, 9:16 AM
Mon, May 11, 5:03 PM
- With forex clearly a headwind (it had a 250 bps impact on Q1 revenue growth), Rackspace's (NYSE:RAX) guidance for Q2 revenue to be up 1.5%-2.5% Q/Q in constant currency implies Q2 sales will fall short of a consensus of $502.1M (+4.6% Q/Q in actual dollars).
- Financials: Revenue growth fell to 14.1% Y/Y in Q1 from Q4's 15.8% and Q3's 18.3%. Gross margin was 66.4%, -100 bps Q/Q and -30 bps Y/Y. R&D rose to 6.7% of revenue from 6% a year ago, and G&A to 18% from 16.9%. Sales/marketing fell to 12.3% from 13.6%. $90.2M was spent on capex, -10% Y/Y and equal to 19% of revenue.
- Business metrics: Average revenue/server was $1,412, flat Q/Q and up $76 Y/Y; it had been rising Q/Q in prior quarters. Servers deployed rose 1% Q/Q and 7% Y/Y to 114,105. Headcount rose by 28 Q/Q and 221 Y/Y to 5,964. Rackspace is no longer breaking out its dedicated cloud (Web hosting) and public cloud (IaaS) revenue.
- Also: 1) Adjusted EBITDA margin was 33.6% vs. 35% in Q4 and 33.2% a year ago (Q2 guidance is at 32%-34%). 2) Adjusted free cash flow was $67.4M, +69% Y/Y and above net income of $28.4M. 3) No buybacks took place; $200M was spent on them in Q4. Rackspace says it's seeing "a rising number of new, larger enterprise customers."
- Rackspace has fallen to $46.88 AH. Is competition taking a toll? Amazon's AWS revenue rose 49% Y/Y in Q1 to $1.57B, and Synergy Research thinks Microsoft, IBM, and Google saw even faster IaaS/PaaS cloud service growth (albeit off much smaller bases).
- Q1 results, PR
Mon, May 11, 4:09 PM
Fri, Apr. 24, 11:08 AM
- In its first quarter of breaking out Amazon Web Services' results on their own, Amazon reported the business had Q1 revenue of $1.57B (+49% Y/Y) and (notably) a $265M op. profit (+8%).
- Rival Rackspace (NYSE:RAX) is getting a lift from the numbers ahead of its May 11 Q1 report. For reference, Rackspace had Q4 public cloud segment revenue of $147.7M (+26% Y/Y, 31% of total revenue).
Mon, Apr. 20, 4:09 PM
- Equinix (EQIX +1.6%) should post revenue and EBITDA ahead of Street estimates amid "y/y growth in MRR ... and a secular shift to the cloud," according to Pacific Crest's Michael Bowen and Trevor Upton. It's one of five stocks that Pacific Crest mentioned buying into upcoming earnings in its Q1 Communications Services Preview.
- The stocks all get an Outperform rating from the analysts. Equinix received a $255 price target and the firm "would remind investors that our bull case on shares remains $280." Shares closed today at $239.80 and the firm reports April 29.
- Rackspace (RAX +0.9%) also benefits from shifting business, the firm says: "We believe we are in the early stages of a secular shift from on-premise data centers to hybrid clouds made up of private and public cloud platforms. We believe the company is executing more efficiently and improving its managed service value proposition." Their price target is $58; shares closed today at $52.53 and the company reports May 11.
- SBA Communications (SBAC +1.8%) got a price target of $138 on expectations of strong leasing activity and hearing about positive impact from the FCC's last spectrum auction; it closed today at $121.84 and reports on Friday.
- Cogent Communications (CCOI +1%) received a price target of $45 and closed today at $34.24; it reports May 7. GTT Communications (GTT +1.6%) got a $24 target and closed today at $18.31; it reports May 7 as well.
Thu, Apr. 9, 10:56 AM
- BofA/Merrill has downgraded cloud HR/payroll software vendor Paylocity (PCTY -5.9%) and cloud fleet management software vendor Fleetmatics (FLTX -3.2%) to Underperform, and cloud contact center software vendor Five9 (FIVN -4.7%) to Neutral. Rackspace (NYSE:RAX) and Citrix (NASDAQ:CTXS) have also been downgraded (to Neutral and Underperform, respectively), but are posting sub-1% declines.
- Shares of all 3 companies rallied in February in response to Q4 beats (I, II, III)
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