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
Aug. 11, 2014, 4:51 PM
- Rackspace (NYSE:RAX) expects Q3 revenue of $454M-$461M, largely above a $454.2M consensus.
- Amid intense cloud infrastructure (IaaS) price competition, adjusted EBITDA margin fell to 32.1% in Q2 from 33.2% and 32.8% a year ago, pressuring EPS. Rackspace expects a margin of 31%-33% in Q3; it recently overhauled its IaaS pricing in an attempt to stand out from rivals.
- Dedicated cloud (Web hosting) revenue +12% Y/Y to $310.6M. Public cloud (OpenStack) revenue +32% to $130.5M.
- Adjusted free cash flow was $26.3M, down from $39.9M in Q1 and up from $11.5M a year ago. Capex rose 11% Q/Q to $112.4M (25% of revenue).
- Net upgrade rate rose to 1.5% from a depressed 0.9% in Q1, while churn improved to -0.7% from -0.6%. Average revenue/server grew 2.9% Q/Q to $1,375, and servers deployed 1.4% to 107.7K.
- Following a slew of M&A rumors, Rackspace says it's still exploring its options.
- RAX -1.1% AH. Q2 results, PR.
Aug. 11, 2014, 4:08 PM
Aug. 10, 2014, 5:35 PM
Jul. 15, 2014, 1:41 PM
- Rackspace (RAX -1.7%) is breaking up its cloud infrastructure (IaaS) offerings into two service tiers: A basic Managed Infrastructure tier that provides standard IaaS services and technical support, and a Managed Operations tier that adds "proactive features such as a dedicated account manager, 24x7 availability monitoring and response, and management of common operating systems and application stacks."
- The company is also now providing its Cloud Monitoring service for free to all IaaS clients, and launching a program (called developer+) that provides cloud app developers a bundle of services for free for 12 months. As GigaOm notes, Amazon currently has a big edge in developer support; Google is also trying hard to woo developers.
- Rackspace argues its new pricing structure allows it to offer "a service level agreement that is not available with other providers," and makes clear to buyers they're receiving services not provided by cheaper rivals. CTO John Engates: "People looked at our price and the AWS price and thought they were comparing apples to apples. In reality, we had apple pie, not apples."
- Amazon, Google, and Microsoft's aggressive IaaS pricing has weighed on Rackspace's shares for some time. The company has already declared it'll compete on service quality rather than price.
Jul. 11, 2014, 5:45 PM
- Rackspace (RAX -5.4%) has received "only modest buyer interest" since putting itself on the block, BrightWire reports. Shares have added to the Thursday losses they saw following a re/code report stating sources have denied H-P made a bid.
- BrightWire states CenturyLink (CTL - unchanged) "made an initial overture" to buy Rackspace, but adds its interest "was only casual and soon faded." Citi made the case for a Rackspace/CenturyLink deal last month.
- Separately, Wells Fargo's Gary Powell says talks make him consider a Rackspace LBO deal (would involve P-E firms) unlikely, and that the market has "correctly assumed" a 70%+ probability that no strategic buyer (i.e. a tech company) will emerge.
- Nonetheless, Powell reiterates an Outperform, and calls Rackspace's asset value under-appreciated. He adds CenturyLink and H-P "have not completely ruled out a potential deal with RAX."
Jul. 10, 2014, 12:51 PM
- Mark Interrante, until now Rackspace's (RAX -2.1%) SVP of products and engineering, has been hired by H-P (HPQ +0.4%) to be the SVP of engineering for the company's cloud services unit
- Both H-P and Rackspace offer cloud infrastructure (IaaS) services based on the OpenStack platform; Rackspace is an early leader within the market. H-P also offers cloud app platform (PaaS) services with the help of a partnership with Cloud Foundry (a part of EMC/VMware's Pivotal spinoff). Each company faces intense competition from Amazon, Google, and Microsoft.
- Meanwhile, re/code states multiple sources have "categorically denied" a TechCrunch report stating H-P made a $43/share bid for Rackspace. As it is, dealReporter had expressed skepticism about the reliability of a source providing similar info.
Jul. 2, 2014, 3:13 PM
- "We've tried to make clear that we're reporting an unconfirmed source here, but an interesting angle nonetheless," says TechCrunch, updating this morning's story suggesting Rackspace (RAX +6.4%) is in talks with a P-E firm about taking itself private.
- Far more skeptical, Dealreporter says it received a note with similar wording to that of the TechCrunch story, but didn't believe the source.
- Though off the highs a bit, Rackspace nevertheless continues to post a sharp gain on the session.
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