Fri, Mar. 6, 7:22 PM
- During talks with Rackspace (NYSE:RAX) sales chief Todd Cione and other execs, JMP's Patrick Walravens was told business and demand signals remain good, particularly from larger organizations, and that the Web hosting/cloud infrastructure provider is beginning to reap the benefits of last year's big sales reorg.
- Also heard: Last year's favorable Gartner Magic Quadrant report (named Rackspace one of two leaders, along with Datapipe, in cloud-enabled managed hosting) has driven an increase in enterprise RFPs; Microsoft (though competing against Rackspace via Azure) remains Rackspace's largest hosting partner.
- In addition, Walravens reports VMware (NYSE:VMW) and Rackspace plan joint account planning and branding related to their recently-launched partnership - it involves a managed private cloud service based on VMware's comprehensive vCloud management platform.
- Following the deal, Rackspace offers managed private cloud services relying on VMware and Microsoft software at similar prices to its mainstay OpenStack offerings. "We are agnostic," says Rackspace exec Arrian Mehis. VMware, meanwhile, has been relying on service provider partnerships to extend vCloud's reach.
- Previously: Rackspace gains post-earnings as analysts react
- Previously: VMware forms public cloud service partnership with Google
Thu, Feb. 19, 2:58 PM
- Today's notable tech gainers include fiber equipment provider Zhone (ZHNE +10.6%), IP licensing firm VirnetX (VHC +7%), healthcare software provider Allscripts (MDRX +4.8%), app development software provider Pegasystems (PEGA +6%), software outsourcing firm EPAM (EPAM +5.6%), security software/service provider Imperva (IMPV +5.3%), and cloud HR software provider Paylocity (PCTY +4.5%).
- Notable decliners include Chinese search/app store/security app provider Qihoo (QIHU -5.2%), Web hosting/cloud infrastructure provider Rackspace (RAX -3.9%), LED equipment maker Veeco (VECO -4.9%), and analog/mixed-signal chipmaker MagnaChip (MX -5%). The Nasdaq is up 0.4%.
- VirnetX is adding to the Wednesday gains seen after Apple patent review petitions were denied, and Qihoo is adding to the losses seen following a Jefferies downgrade.
- Rackspace and Veeco are reversing the gains they saw yesterday after posting their Q4 reports (I, II), and then some. MagnaChip is now down 58% since posting its Q1-Q3 results a week ago.
- Previously covered: SolarCity, Facebook, Castlight, Applied Materials, DragonWave, Nimble Storage, AVG, Ascent Solar, Netlist
Wed, Feb. 18, 12:15 PM
- Down AH yesterday due to the light sales guidance provided with its mixed Q4 results, Rackspace (RAX +1.4%) is now back above $50. Helping its cause: Pac Crest has upgraded to Outperform, and at least four firms have hiked their targets.
- Pac Crest cites enterprise and OpenStack momentum as reasons for upgrading: "In the second half of 2014, Rackspace won more large enterprise contracts worth at least $100,000 per month than it had in the prior five quarters combined ... management indicated that OpenStack now makes up more than 50% of its public cloud revenue, which implies OpenStack revenue is at least 15.6% of its total revenue."
- Cowen (target hiked to $75) now considers it likely Rackspace "will announce support for a mega cloud provider in 1H15," thereby boosting its long-term addressable market and lowering future capex needs (in exchange for sharing revenue). It adds sales guidance was in-line after adjusting for forex, and that EBITDA margin guidance was better than expected.
- Meanwhile, new CEO Taylor Rhodes argues the cloud infrastructure (IaaS) market's price war is calming down. "Amazon Web Services (NASDAQ:AMZN) in November, for the first time, didn’t make a price cut move ... AWS is feeling like they are the reference brand leader, that they are strong versus Google (NASDAQ:GOOG), so they don’t need to do it as much. Microsoft (NASDAQ:MSFT) is cutting price, but who knows how much share they are actually taking."
- He also reiterates Rackspace's assertion that its OpenStack/hybrid cloud offerings are differentiated in the battle for enterprise accounts. "The mainstream market has two problems: They have legacy apps that won’t go [to multi-tenant public clouds] automatically ... the second problem they have is this skills set gap ... There is a need for software and tools development."
- Q4 results, guidance/details
Tue, Feb. 17, 5:37 PM
Tue, Feb. 17, 4:22 PM
- With forex providing a 1% headwind, Rackspace (NYSE:RAX) expects Q1 revenue of $477M-$488M, below a $490.5M consensus. Full-year revenue guidance is at $2B-$2.1B vs. a $2.08B consensus (2% forex headwind).
- Q4 adjusted EBITDA margin was 35%, +50 bps Q/Q and +260 bps Y/Y, and at the high end of a 33%-35% guidance range. However, Q1 guidance is at 32%-34% (cloud price pressure?), and full-year guidance at 33%-36% (still favorable to 2014's 33.7% at the midpoint).
- Dedicated cloud (Web hosting) revenue rose 8% Y/Y in Q4 to $324.7M, a slowdown from Q3's 14%. Public cloud revenue (inc. OpenStack) grew 26% to $147.7M after growing 29% in Q3. Servers deployed rose to 112.7K from 110.5K in Q3 and 103.9K a year ago, and average revenue/server grew to $1,412 from $1,405 and $1,322.
- Gross margin was 67.4%, up 20 bps Y/Y but down 150 bps Q/Q. Total costs/expenses rose 11% Y/Y to $422.4M (less than revenue growth of 15.8%).
- Free cash flow was $55M, above net income of $36.9M. $105M (22% of revenue) was spent on capex.
- Shares have fallen to $47.00 in AH trading. They went into earnings up more than $12 from where they traded prior to Rackspace's Q3 report.
- Q4 results, PR
Tue, Feb. 17, 4:03 PM| Comment!
Mon, Feb. 16, 5:35 PM
Thu, Jan. 15, 6:04 PM
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
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