Wow, it's been a busy few days for the internet infrastructure sector, it seems like just about everyone yet to report earnings is trying to squeeze through the door. Today hosting specialist Rackspace (RAX), which had the lucky timing of going public in August just before the economy fell and broke a hip, reported its third quarter numbers. I don't yet have a great feel for this company and where they might or might not go. On the one hand there is the older but solid hosting/colo model and on the other hand we have its declared intention to be a leader in the apparent next internet concept-phenomenon of 'cloud computing' .
Revenues of $138.4M were up 5.8% sequentially, which would be awesome for anyone else but for Rackspace they seemed slightly tame. Of course, nobody is expecting them to keep growing at a rate above 50% annually for long - seems like 30% is the market's expectation for next year - and today's revenue number was probably in-line. Is it the economy or simply increasing girth that would slow down Rackspace's growth? It seems to me that the latter is more likely, as the economy isn't doing much damage in the datacenter. EBITDA of $37M was up from $34M in the second quarter, and earnings per share of $0.04 seem to be rather higher than analysts were expecting - Yahoo finance has analysts predicting between .01 and .03.
The bigger question of course, is where Rackspace will fit into the cloud. Is there room for them with Amazon and Microsoft and Salesforce.com and a gazillion startups all fighting for a market that doesn't even exist yet? When internet buzz strikes in good times there is always room, but in times like this doubt rules minds. Who really knows, but I'd say that by raising money via an IPO just before a credit crisis, Rackspace has put itself in a position where they can spend where others must save. They have the resources and they know how to play.
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