Rackspace Reports Q3, Appoints VP

• By Liam Eagle, November 06, 2008

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(WEB HOST INDUSTRY REVIEW) -- Almost three months after its initial public offering on August 8, 2008, Rackspace (www.rackspace.com) held its second earnings call as a public company Wednesday to discuss its third quarter results.

For the quarter ending September 30, 2008, the company reported increased profits and revenue, and the continued execution of its growth strategy. Net revenues for the quarter were $238.4 million, an increase of 5.8 percent from the second quarter of 2008 and up 44 percent from the third quarter in 2007.

Net income of $5.2 million, however, was down 16 percent from the same quarter in 2007. The company says revenues were impacted negatively by the depreciation of the Pound Sterling versus the US Dollar, which affected the peformance of Rackspace's UK operation.

The company also said its net revenues for the first nine months of 2008 were $388.8 million, an increase of 52.3 percent in comparison to the same portion of 2007.

Rackspace said one of the best indicators of continued growth was the increase in its installed base of customers, which grew at an average rate of 0.6 percent per month during the third quarter.

The company's customer count reached 36,000, including 15,000 mail customers, and its server count reached more than 45,200.

Rackspace, which began trading at $10.70 following its IPO has seen its share price fluctuate considerably during the few months that followed, as have the shares of many companies, given the disastrous economic revelations that came shortly after Rackspace began trading publicly. In the time since, the company's stock has risen as high as $11.95 and fallen as low as $4.47. It was trading at $6.01 as of about 3:00 p.m. Eastern time, Thursday.

"We've delivered a strong quarter with nearly every metric improving over the second quarter of 2008," said Bruce Knooihuizen, senior vice president and chief financial officer, quoted in the press release. "We are well funded with excess cash to act opportunistically and make the right investments to continue to fuel our growth. In addition, we will continue to focus on business execution and delivering attractive returns on the investments we have made over the last two years."

Major events for Rackspace during the third quarter included the previously mentioned commence of trading on the New York Stock Exchange under the RAX ticker symbol, which generated $144.6 million for the company. September 8, the company opened its Asian headquarters and a data center in Hong Kong. And September 18, Rackspace introduced a new product known as platform hosting.

In the period between since the end of the third quarter on September 30, the company made a major addition to its cloud strategy, through the acquisition of SliceHost and Jungle Disk.

Rackspace held a conference call Wednesday evening to discuss the results, and also delivered the information via a webcast, hosted at the company's investor site, ir.rackspace.com.

Accompanying the earnings report was notice of the appointment of Jim Lewandowski as senior vice president of worldwide sales for the company.

Rackspace says in its press release that Lewandowski will be "responsible for generating consistent revenue growth globally across all of the company's businesses." He will transition into the role currently led by Glenn Reinus, who is approaching retirement, but will work with Lewandowski during the transition.

Lewandowski formerly spent four years with McAfee as executive vice president of the Americas in sales. He oversaw the North American and Latin American sales organizations.

"Jim brings more than 20 years of experience in sales positions at leading technology companies where he has been directly responsible for increased sales, margin expansion and successful acquisition integration," says Rackspace CEO Lanham Napier, quoted in the press release. "In addition Glenn Reinus has been an important part of Rackspace's success and rapid growth for nearly six years, and on behalf of all Rackers, I want to thank him for his leadership. I look forward to working with both Glenn and Jim to ensure a smooth transition."

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