Eight Years Later, Is Rackspace Finally Going To Try For Another IPO?
Erick Schonfeld
25 comments »
The last time Web hosting provider Rackspace filed for an IPO was back in March, 2000, at the peak of the first Internet bubble. Now, it may be about to do so again. Perhaps as soon as tomorrow or Monday, according to one tipster who tells us that email to that effect are circulating inside the company. (Rackspace is a TechCrunch advertiser, but our source is not an employee).
There are no filings yet with the SEC, but press releases touting its revenues have mysteriously been stripped from the company’s site. Here is one that’s been cached, announcing 2006 revenues of $224 million. Various reports put quarterly revenues for 2007 at $75 million, $84 million, and $96 million, respectively for each of the first three quarters, which suggests that full-year 2007 revenues were north of $350 million. Rackspace claims to be profitable, and has more than 15,000 customers. A major outage last November caused by a traffic accident near its Dallas data center was noticed across the Web.
Rumors of an IPO have been swirling recently. The company just hired a new chief financial officer on March 31. Last October, it acquired Webmail.us and it offers cloud computing services that compete with Amazon’s Web Services through its Mosso brand. In January, it shifted strategyto emphasize its utility computing business model.
It is time to pull the trigger.
It’s about time. RackSpace is the single significantly sized hosting company from the boom that stuck it through the bust, and is still going strong. Their commitment to being profitable on every customer while still providing a high level of support is unheard of in this industry. Whenever I get quotes from RackSpace it’s readily apparently how well they understand their costs, the competition, and what their real value proposition is.
Now could be seen as a good time too, plenty of bankers in the market with time on their hands.
Rackspace’s new datacenter is kind of sexy. It’s an abandoned mall in Texas. Probably the only good use for a shopping mall.
For the sake of Web 2.0, Rackspace, please don’t file.
What happened during last IPO attempt. Anyone aware of this please comment.
Now the question is: Who has the balls to invest in Rackspace?
@7 rackspace is the first tech stock I’d consider putting money into since Google.
probably want to cash out before the VC funding dries up and all those start ups won’t be able to afford the expensive rackspace and will go for one of the cheaper solutions or maybe they want to cash out because of AWS/Google sort of encroaching on their territory
Boy imagine if this time too Rackspace’s IPO signals another bubble burst (in Tech stocks)…
Just call the company and see if they will do an interview. If they don’t grant an interview than they have entered the quiet period…
btw- the video postings are kind of cool. Michael you look very tired. Get some rest or you’re going to crash very hard.
@ Michael T. Halligan: I believe they are only relocating their HQ to the mall.
Actually, there is a recent SEC filing, but it’s not an S1:
http://www.datacenterknowledge....._near.html
yo erick, where’s the obligatory cnet story for this quarter? here’s what i wrote on one of mike’s posts..
“hey mike, how come no cnet earnings story this quarter? you guys went out of your way to report disappointing quarters earlier. could it be because the report was good and there’s a yahoo deal to boot?
Based on the survey of the Boston colocation/datacenter market which I am currently doing (to see if we can get a better datacenter deal than we have), markets are tight and I would bet profits are quite robust.
I agree with Michael T. Halligan, I’d buy Rackspace stock at IPO prices if I could.
For Rackspace to survive as long as it has in a fiercely competitive marketplace must mean they’ve done something right.
What I don’t get is their Mosso.com cloud computing platform. On paper it seems good until you realize their insane pricing model. Their own calculator at the address below verifies this. Check out their cost to run a blog on their cloud.
http://www.mosso.com/pricing.jsp
Pricing cloud computing by hits is just crazy. One could use S3 to host all the static content and use Mosso for the computationally intense scripts. The Mosso blog has not been updated in a few months, and there are many complaints of downtime with Mosso if you look around. Media Temple has the right way to price cloud computing, and I wish Mosso would take a look and fix up their cloud computing. Then it would be truly compelling.
@15 what’s better is that rackspace owns a couple of it’s datacenters, and has all the economies of scale that would allow them to compete in the lower-end, dedicated server or shared hosting/cloud markets.. Given that they could, I’m impressed with the fact that they don’t. RackSpace sold off their dedicated server business unit ServerBeach to Peer1 in 2006. ServerBeach was profitable, and going through hypergrowth, but didn’t meet RackSpace’s edict that every customer must hit their minimum true profit margin (http://money.cnn.com/magazines/fsb/fsb_archive/2006/11/01/8391420/index.htm)
Those of us who suffered through the Telco collapse in 2000, and got booted out of bankrupt datacenters like Abovenet (365main) have learned to be very cautious about telco choices. Telcos & Datacenters who choose profits over hypergrowth are a win in my book.
When Rackspace was going to go public in 2000 the market was insane. w None of the telcos or datacenter providers were profitable. Something like 75% of the big players went under. Most of the providers today are doing well are doing so because they’re feeding off of the carcass of the telco bust. Rackspace has gone through huge growth through sane fiscal practices (like not selling power at a loss), and good management, without being vultures.
An IPO would give Rackspace the cash infusion needed to continue challenging the established, capital-rich baby-boomer consulting firms that provide managed hosting like EDS, Perot, and IBM Global Services. It will also give them a fighting chance to compete in the oncoming price-war ugliness that Google and Amazon are about to enter into.
These are exciting times ahead of us. Datacenters are in high demand right now, and profitable. This time the demand isn’t driven so much by over-funded, poorly conceived vc-backed startups, but by a complex set of factors including new technology adaption, years of mid-sized company IT growth deferment, equipment refresh cycles, and the essentially free datacenter deals that were to be had in 2004.
Beyond Rackspace, DRT, CRG, Berbee, and Dupont Fabros are also exciting. Real Estate that’s actually profitable, and not affected by the sub-prime f***-up.
@25 actually datacenterknowledge.com had a video about it a couple of weeks ago. They’re building out datacenters inside of the mall as well.
For the record, Mosso is NOTHING like AWS. To compare the two is ridiculous. They refer to their tech as “cloud computing,” but really it offers shared hosting on a clustered environment. You can’t even get SSH on the damn thing. Also, I’ve heard the uptime is teh suck.
Whats the use of removing the revenue #’s when you can just search for them on google?
http://www.google.com/search?q=rackspace+revenues
I agree with the other guys - Mosso is just flat out basic virtual web hosting, nothing special there.
@ #9 (Andrew):
I doubt anyone is “cashing out”, but rather attempting to raise the capital needed to develop and deploy new services and compete with the new threats emerging in the market.
No dominant leader has yet emerged in the hosted IT services industry, whoever stands on top after the next few very interesting years will be wildly profitable. Rackspace has every reason to aggressively attack new services and grab up as much market share as they can.
@Dan no dominant leader will, to be fair. EDS does more IT services and more hosting than probably any other in the world, but if you’re not a $5m/year contract for them, you probably won’t even know they exist. I think Rackspace is looking to cut the big guys like EDS and IBM Global Services down a notch or three.. I mean EDS has lost deals in the past 4 years that were worth more revenue than Rackspace has ever seen.