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Rackspace Hosting, Inc. (RAX)

  • Jul. 2, 2014, 9:15 AM
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  • Jul. 2, 2014, 8:13 AM
    • Rackspace (RAX) is in talks with a P-E firm about a deal to take the company private, reports TechCrunch, with an eye towards maybe making an official announcement this week.
    • "The pressures of being a public company are too much," says one source, and the idea of going private "has gained sufficient traction" in the boardroom.
    • The going-private leak comes amid at least three acquisition bids, says TC, including one from H-P (HPQ) for up to $43 per share.
    • RAX +9.6% to $37 premarket
    • Previously: Rackspace falls on negative M&A report
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  • Jun. 27, 2014, 2:00 PM
    • Sources tell dealReporter Rackspace (RAX -4.3%) is failing to draw interest from strategic suitors as it continues evaluating its options.
    • Shares have sold off on the report after spending most of the day up slightly. They flew higher last month thanks to a report stating Rackspace had hired Morgan Stanley to evaluate "inbound strategic proposals" and other options.
    • Previous: Citi calls CenturyLink "a good fit" for Rackspace
  • Jun. 20, 2014, 10:10 AM
    • Acquiring Rackspace (RAX +1%) would double CenturyLink's (CTL - unchanged) data services revenue, boost top-line growth, increase "customer stickiness," and "modestly [raise] leverage," writes Citi's David Phipps, making the case for a deal.
    • At the same time, Phipps estimates a deal for Rackspace ($5.3B current market cap) would require ~$6B in financing, which in turn would lead to a credit downgrade for CenturyLink.
    • CenturyLink spent $2.5B in 2011 to buy Web hosting and cloud infrastructure (IaaS) firm Savvis. But it also took a $1.1B charge last fall for its data hosting unit. The company has since bought another IaaS firm (Tier 3), and begun moving its managed data services to its cloud.
    • Rackspace, a major Web host and the top provider of IaaS services based on the OpenStack platform, has reportedly hired Morgan Stanley to evaluate "inbound strategic proposals" and other options.
    • Both Rackspace and CenturyLink are facing intense price competition from market leader Amazon, as well as Microsoft and Google.
    • Previous: CenturyLink counting on data centers, network to challenge Amazon
  • May 16, 2014, 12:46 PM
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  • May 16, 2014, 9:52 AM
    • "Because Rackspace (RAX +18.4%) operates the largest production deployment of OpenStack and is the [#2] public cloud provider to [Amazon], it could be a strategic asset to other companies ... such as AT&T, IBM, EMC, HP, and VMware," says Blair's Jim Breen following a Bloomberg report about Rackspace's hiring of Morgan Stanley to evaluate "inbound strategic proposals."
    • Worth noting: IBM, H-P, AT&T, and VMware already offer their own cloud infrastructure services, and VMware supports an OpenStack rival (its vCloud platform). Moreover, any potential buyer will likely take a close look at Rackspace's long-term ability to handle Amazon/Microsoft/Google's aggressive pricing.
    • Nonetheless, the Street sees plenty of possibilities, given Rackspace's size and OpenStack software/services investments. Dell and Cisco are a couple of the other names brought up. Blair thinks Rackspace could get $54/share, given recent deal prices.
    • Over 11% of the float was shorted as of April 30. Shares are up 29% since Bloomberg's report broke just before Thursday's close.
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  • May 16, 2014, 9:17 AM
  • May 15, 2014, 5:41 PM
    • Top gainers, as of 5:15 p.m.: ONE +33.1%. ACXM +26.6%. JCP +20.3%. JWN +8.9%. RAX +7.7%.
    • Top losers, as of 5:15 p.m.: ENSV -4.1%. HYGS -3.6%. DQ -3.6%. ORIT -2.1%. ZAGG -1.8%.
  • May 15, 2014, 4:13 PM
    • Bloomberg reports Rackspace (RAX +9.6%) has hired Morgan Stanley to evaluate "inbound strategic proposals" and other options. Shares spiked shortly before the close, and are up another 1.2% AH.
    • Rackspace jumped earlier this week on a Q1 beat and solid guidance, but shares remain well off their Jan. '13 high of $81.36, thanks in part to worries about intense cloud infrastructure (IaaS) price pressure, and the impact of IaaS services on Rackspace's traditional hosting business.
    • The February retirement of CEO Lanham Napier has already fueled M&A speculation.
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  • May 13, 2014, 9:15 AM
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  • May 12, 2014, 5:49 PM
    • Top gainers, as of 5:15 p.m.: RAX +12.4%. HALO +12.4%. DTV +6.2%. TC +5.0%. MBI +4.3%.
    • Top losers, as of 5:15 p.m.: RDEN -16.2%. CALL -5.9%. BCOR -4.4%. OKS -3.6%. AAN -3.4%.
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  • May 12, 2014, 4:17 PM
    • Rackspace (RAX) expects Q2 revenue of $434M-$440M, favorable at the midpoint to a $435.5M consensus.
    • In spite of intense cloud infrastructure price pressure, adjusted EBITDA margin rose 80 bps Q/Q in Q1 to 33.2% (it was down 130 bps Y/Y), and contributing to its EPS beat. Rackspace expects a Q2 adjusted EBITDA margin of 32%-34%.
    • Adjusted free cash flow was $39.9M, up from $15.3M in Q4 and -$1.2M a year ago, and also topping net income of $25M. Capex totaled $101M (24% of revenue).
    • Dedicated cloud (Web hosting) revenue +3% Q/Q and +10% Y/Y to $299.7M. Public cloud revenue (inc. OpenStack) +4% Q/Q and +34% Y/Y to $121.4M.
    • Net upgrade rate fell to 0.9% from 1.1% in Q4. Churn was -0.6% vs. -0.7%. Servers deployed rose 2% Q/Q to 106.2K, and average revenue/server rose $14 to $1,336.
    • Q1 results, PR
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  • May 12, 2014, 4:01 PM
    • Rackspace Hosting (RAX): Q1 EPS of $0.18 beats by $0.06.
    • Revenue of $421M (+16.2% Y/Y) beats by $1.37M.
    • Shares +5.5%.
    • Press Release
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  • May 11, 2014, 5:35 PM
  • Apr. 22, 2014, 10:59 AM
    • ITG Research has joined the list of firms (previous) worried a cloud infrastructure (IaaS) price war will take a toll on Rackspace (RAX -2.5%).
    • Amazon, Google, and Microsoft have each announced major cloud computing and storage price cuts in recent weeks. Rackspace declined to return fire.
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  • Apr. 9, 2014, 10:40 AM
    • "We do not base our prices on competitors' rental rates for raw infrastructure. Rackspace (RAX -2.4%) has for 15 years charged premium prices for premium service, expertise, performance and reliability," writes CTO John Engates after being asked by The Register if his company will match the huge cloud infrastructure (IaaS) price cuts recently announced by Google, Amazon, and Microsoft.
    • Google's cuts were accompanied by a new pricing scheme that yields automatic price cuts for reserved capacity whenever spot pricing is lowered. Worries about the market share and margin impact of competitor pricing have pressured Rackspace's shares for some time.
    • The Register observes Rackspace charges 143% more than Amazon ($0.68/hours vs. $0.28/hour) for a comparable performance-optimized computing instance featuring SSD storage. A Google instance lacking SSD storage matches Amazon's pricing.
    • Rackspace's public cloud revenue, including revenue from its OpenStack platform, rose 34% Y/Y in Q4, and equaled 29% of its total revenue. Synergy Research estimates the total market for IaaS and cloud app platform (PaaS) services rose 52% in Q4. Amazon continues to have a dominant IaaS share.
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Company Description
Rackspace Hosting Inc, through its operating subsidiaries, is a provider of cloud computing services, managing web-based IT systems for small and medium-sized businesses as well as large enterprises.