Rackspace Shows Its Muscle

Webhosting specialist Rackspace Hosting (NYSE:RAX, news, filings) announced solid Q4 and full year 2008 earnings today. Revenues of $143.1M were up 3% sequentially despite being affected by negative foreign exchange swings in the UK and Europe where about one fourth of their revenues derive. Overall, revenues for 2008 grew at a 46.9% clip, an enviable number by any measure let alone during a recession. Costs fell across the board, resulting in a profit of $0.06/share, well above estimates.

Recession or no recession, Rackspace looks well positioned going into 2009, flush with cash and confidence. They have already secured further datacenter space, leasing some 11,000 square in the new Ashburn facility on which Dupont Fabros Technology (NYSE:DFT, news, filings) just restarted construction. 2009 looks to be the year of the cloud for the company, but of course any time we consider the prospects for new lines of business we must be cautious.

It always takes longer than we expect for loosely defined buzzwords to transform into profitable business models – if they ever do. Rackspace has the scale, cash and momentum to give it as good a shot as anyone. I look for them to make more strategic acquisitions this year to expand their capabilities, they are definitely one to watch.

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Categories: Datacenter · Financials