Rackspace cages lackluster IPO

Your financial future looks cloudy

By Ashlee Vance in Mountain View • Get more from this author

Posted in Financial News, 8th August 2008 18:17 GMT

HP whitepaper - The business case for Virtualization

Rackspace appears to have a knack for ill-timed IPOs.

Shares in the hosting company dropped as much as 19 per cent during their debut on the New York Stock Exchange. And, at the time of this report, RAX - at $11.37 per share - was still sagging below the IPO price of $12.50 per share, which was already at the low end of an expected $12-$16 per share range. Still, the San Antonio-based Rackspace has raised more than $100m by going public and plans to use that infusion to fuel growth.

Rackspace, which hosts The Register's hardware, once looked to go public in 2000. Bad timing indeed as the technology meltdown shattered the hopes and dreams of any company linked to the internet build out. So, Rackspace pulled the IPO plans in March of 2001.

This time around Rackspace finds itself in the midst of another internet build out. The likes of Google, Microsoft, Yahoo!, Amazon and Facebook receive tons of attention for their voracious data center appetites.

But much of the enthusiasm for this service provider-led push has been drowned out by larger economic issues. So, it would seem, people can only get so excited about a company that offers some cages and cloudy-like storage services.

Documents lodged with the US Securities and Exchange Commission show Rackspace turning a profit over the past five years. During the quarter ended March 31, Rackspace posted revenue of $120m and a profit of $5.4m. ®

HP Whitepaper - The business case for Virtualization