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
Sep. 15, 2014, 3:49 PM
Sep. 15, 2014, 7:08 AM| Comment!
Sep. 8, 2014, 2:05 AM
- Following months of takeover speculation and a strategic review that started in May, CenturyLink (NYSE:CTL) is now looking to acquire Rackspace (NYSE:RAX), Bloomberg reports.
- A deal would enable CenturyLink to better compete against competitors by expanding its offerings of Internet and cloud services.
- Rackspace’s sales climbed 17% in 2013 to $1.5B, with $415.2M coming from cloud computing. CenturyLink’s revenue declined 1.5% to $18.1B last year.
Aug. 22, 2014, 2:00 PM
- Re/code: "Sources with direct knowledge of HP’s (NYSE:HPQ) plans — or in this case, lack of plans — told Re/code on Friday that nothing has changed in its view of Rackspace (RAX +1.5%) since our report in July: It has no interest in acquiring it, not then, not now."
- Shares have pared the morning gains they saw in response to a UBS note speculating H-P could make a ~$45/share bid. Re/code notes remarks made on H-P's Wednesday earnings CC (transcript) about the existence of "material non-public information" (has affected H-P's buyback activity) had bolstered hopes for a Rackspace deal.
Aug. 22, 2014, 11:28 AM
- Rackspace (RAX +3.9%) could receive a ~$45/share bid from H-P, UBS speculates in a morning note. Shares have rallied in response.
- Last month, TechCrunch reported hearing of an H-P bid for Rackspace, but later backtracked a bit. The following week, re/code stated multiple sources had "categorically denied" the H-P report.
- Shares are up 20% from their Aug. 12 post-earnings lows, aided by Dan Loeb and Blue Harbour Group's disclosures.
Aug. 18, 2014, 5:35 PM
Aug. 18, 2014, 4:56 PM
- The WSJ reports activist Blue Harbour Group has grown its stake in Rackspace (NYSE:RAX) to ~6.5% from the 2.5% it had at the end of Q2. The paper adds Blue Harbour has "communicated" with the Web hosting/IaaS provider, which says it's still evaluating strategic options.
- The report comes 4 days after Dan Loeb's Third Point LLC disclosed it had a 7.25M-share position (good for a 5% stake) at the end of Q2.
- Update: Blue Harbour has filed a new 13D disclosing a 6.4% stake.
Aug. 14, 2014, 12:06 PM
- Dan Loeb's Third Point LLC took a 7.25M-share position in Rackspace (RAX +4.3%) in Q2, along with a 3.5M-share position in Finisar (FNSR -0.2%) and a 2M-share position in InterActiveCorp (IACI +1.7%). (13F)
- Rackspace has jumped on the disclosure. The Web hosting/IaaS provider remains in the midst of a strategic review, and has been the subject of many M&A rumors.
- Finisar has ticked higher after selling off earlier in the wake of Cisco and Oclaro's reports. Shares fell yesterday in response to JDS Uniphase's guidance.
- IAC has moved slightly higher. Shares were already up following news the company has bought Ask.fm.
Aug. 12, 2014, 12:10 PM
- "Management provided no color with regard to the strategic alternatives the board is evaluating and did not provide a timeline for a decision," observes Piper's Andrew Nowinski, discussing Rackspace's (RAX -7.2%) cautious CC remarks (transcript) about its strategic review.
- Nonetheless, Nowinski declares Rackspace's business to be "in good shape," as proven by "accelerating growth in the dedicated segment and better-than-expected revenue guidance."
- Pac Crest's Michael Bowen isn't pleased management stated it's thinking of no longer providing guidance and/or breaking out Web hosting and public cloud revenue. "We believe now is not a good time to become less transparent due to uncertainties around an M&A deal and changes in the marketplace."
- Multiple analysts have taken note of Rackspace's EBITDA margin decline. CFO Karl Picher suggested Rackspace's revamped pricing will eventually boost margins. "We expect that we will have fewer low-paying customers than we currently have ... we are aiming for the high ARPU, high workloads, growing customer set that we serve exceptionally well."
- Prior Rackspace earnings coverage
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