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Rackspace Hosting, Inc.

5/19/2013, 5:13 PM ET

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Thursday, May 9, 12:46 PM Midday top 10 gainers: TRMD +94%. OPTT +42%. VRML +32%. AFFY +28%. TSLA +27%. XOMA +26%. GMCR +25%. CTRP +24%. OWW +23%. CHYR +19%.
Midday top 10 losers: LPSN -34%. PZZI -33%. RAX -26%. KEM -25%. NSYS -23%. MNOV -22%. WG -20%. GV -18%. ORBT -16%. OFIX -16%. Comment! [On the Move]
Thursday, May 9, 12:45 PM Four downgrades are levied on Rackspace (RAX -26.3%) following yesterday's Q1 revenue miss, accompanied by worrying business metrics. Slowing growth and a slumping EBITDA margin (due to price cuts) are problems that will get worse as Microsoft and Google ramp their cloud offerings, argues CLSA, which has cut shares to Sell. The firm adds checks indicate "mid-tier to large firms" are increasingly migrating from hosting to cloud services, and expects OpenStack to be immaterial to RAX's bottom line for the next 1-2 years. Stephens, making a contrarian upgrade to Overweight, thinks "new contract wins are on the horizon," as Rackspace targets enterprises. EQIX -2.2%. COR -4.2%. INXN -3.3%. VMW -2.5%. (transcript) 1 Comment [Tech, Earnings, On the Move]
Thursday, May 9, 9:10 AM Premarket gainers: BKS +29%. TSLA +24%. CTRP +17%. GMCR +15%. GRPN +15%. XOMA +12%. TC +12%. OWW +7%. AFFY +7%. WAC +7%.
Losers: LPSN -22%. RAX -21%. PZZI -17%. GV -11%. MNST -10%. SSNC -7%. HEK -7%. 2 Comments [On the Move]
Wednesday, May 8, 5:53 PM After-hours top gainers, as of 5:30 p.m.: TSLA +17%. GMCR +12%. GRPN +10%. EOX +6%. EXAM +6%.
After-hours top losers: RAX -17%. OME -14%. LPSN -13%. MNST -12%. OFIX -9%. Comment! [On the Move]
Wednesday, May 8, 5:16 PM Rackspace (RAX) now -15.8% AH following its Q1 revenue miss. Server count rose 4% Q/Q to 95.1K, but average revenue/server fell $2 to $1,308 after steadily rising in 2012. Also, the net upgrade rate fell to 0.9% from Q4's 1.2% and Q3's 1.6%, and installed base growth fell to just 0.1% from Q4's 0.5% and Q3's 0.8%. Dedicated cloud (hosting) revenue +15% Y/Y (+18% in Q4) to $271.3M and still 75% of total. Public cloud (OpenStack) +40% (+49% in Q4) to $90.9M - investors might be looking for faster growth, given Amazon and Microsoft's growth rates. Capex was $125.4M (35% of revenue), +43% Q/Q and +52% Y/Y. (PR) 1 Comment [Tech, Earnings, On the Move]
Wednesday, May 8, 4:06 PM Rackspace (RAX): Q1 EPS of $0.20 in-line. Revenue of $362.2M (+20% Y/Y) misses by $5M. Adjusted free cash flow of -$1M. Shares -3.8% AH. CC at 4:30PM ET (webcast). (PR) Comment! [Tech, Earnings, On the Move, Breaking News]
Wednesday, May 8, 12:10 AM Notable earnings after Wednesday’s close: AHT, ALJ, ATLS, ATVI, AVNR, CF, CLNE, CLR, CTL, CTRP, CUZ, CXW, DEPO, DK, ERII, ETE, ETP, GMCR, GRPN, GSS, HALO, HEK, HNSN, JOE, LPSN, MBLX, MDR, MED, MIDD, MM, MNST, MNTX, MWE, NWSA, OSUR, PPO, PVA, QTM, RAX, RGP, RIG, RST, SGMO, SPRD, SSRI, STEC, SXL, SZYM, TCAP, TSLA, WR, XTEX Comment! [Earnings]
Tuesday, May 7, 5:35 PM Notable earnings after Wednesday’s close: AHT, ALJ, ATLS, ATVI, AVNR, CF, CLNE, CLR, CTL, CTRP, CUZ, CXW, DEPO, DK, ERII, ETE, ETP, GMCR, GRPN, GSS, HALO, HEK, HNSN, JOE, LPSN, MBLX, MDR, MED, MIDD, MM, MNST, MNTX, MWE, NWSA, OSUR, PPO, PVA, QTM, RAX, RGP, RIG, RST, SGMO, SPRD, SSRI, STEC, SXL, SZYM, TCAP, TSLA, WR, XTEX Comment! [Earnings]
Thursday, May 2, 12:54 PM Rackspace (RAX +3.1%) catches a bid on fresh speculation IBM is considering a bid for the company - a former IBM exec told GigaOm last month the IT giant has eyed both Rackspace and rival SoftLayer as M&A targets. Rackspace's Q1 report arrives on May 8; 12.3% of the float was shorted as of April 15. (also) Comment! [Tech, On the Move, M&A]
Tuesday, April 16, 10:48 AM The cloud infrastructure price wars seem to have no end in sight: Microsoft (MSFT) responds to Amazon's (AMZN) neverending AWS price cuts - in last week's shareholder letter, Jeff Bezos bragged of cutting prices 27 times over the last 7 years - by promising its Azure service will match AWS cut for cut. Rackspace (RAX - previous) can't be too happy about that. The promise comes as Microsoft overhauls Azure to give clients a way to easily migrate Windows Server/Linux workloads to its public cloud with the help of virtualization software. (last fall: I, II) (Google) 3 Comments [Tech]
Monday, April 15, 1:38 PM With cloud infrastructure competition as intense as ever, Rackspace (RAX -2%) is hoping telcos will prove a growth opportunity: the company is offering to "build and run interoperable public clouds" based on the OpenStack platform for service providers. Rackspace is betting telcos, many of whom have begun offering cloud services, will give it a cut in exchange for its technology and expertise, and the ability to leverage the resources and reach of program partners. It's an interesting value proposition, though Rackspace isn't alone in courting telcos. Last week, Rackspace rolled out a back-end solution aimed at mobile developers. Comment! [Tech]
Wednesday, April 3, 5:34 PM One can safely add Amazon Web Services (AMZN) price cuts to life's short list of certainties. A few months after cutting storage prices for its popular S3 storage service by 24%-27%, AWS has cut S3 data retrieval prices by up to 60%. AWS has also been busy slashing prices for its EC2 computing service, DynamoDB database service, and much else, as it tries to maintain a pricing edge relative to Rackspace (RAX), Microsoft, Google, and others. Rackspace introduced cloud storage volume discounts last month. 6 Comments [Tech, Consumer]
Tuesday, April 2, 10:17 AM A downgrade to Sector Perform from Wells Fargo leads Rackspace (RAX -3%) to fall below $48. "While we continue to believe that RAX is a great company ... we think the company is in a transition period which could limit stock appreciation ... for the next 6-12 months," writes analyst Gray Powell. He's worried about Rackspace's price cuts, and the cannibalizing effect cloud infrastructure services could have on hosting services growth. CLSA started coverage with an Underperform last week, and Pac Crest cut shares to Sector Perform the week before. Comment! [Tech, On the Move]
Wednesday, March 27, 9:56 AM Rackspace (RAX -3.4%) falls towards $50 after CLSA starts coverage with an Underperform and $52 PT. Pac Crest downgraded Rackspace to Sector Perform last week. Shares -32% YTD. Comment! [Tech, On the Move]
Monday, March 25, 11:23 AM eBay (EBAY) is reportedly providing a big vote of confidence for the OpenStack cloud infrastructure platform: an OpenStack Foundation board member tells BI PayPal and eBay plan to remove VMware's (VMW -2%) software from 80K servers in favor of OpenStack-based solutions. The fact OpenStack can lower license fees thanks to its use of open-source software could be a motivating factor. VMware has been aggressively promoting its vCloud Suite as an alternative to OpenStack, Amazon Web Services, and Microsoft's Azure. 2 Comments [Tech]
Friday, March 22, 1:38 PM More on Pac Crest's downgrade of Rackspace (RAX -1.1%): Analyst Michael Bowen gives shares a "fair value estimate" of $45, and thinks enterprise OpenStack cloud infrastructure clients "will demand price concessions for larger or longer commitments and compress margins." He also makes note of Rackspace's embrace of tiered pricing for OpenStack services, an element of its recent price cuts. 1 Comment [Tech]

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