San Antonio, Texas-based web host
Rackspace Hosting Inc has missed financial forecasts for the fourth quarter 2012. Although the company saw an increase of 25% revenue over the same period in the previous year, many see this as an indication that growth in the web hosting market might be slowing. Despite the company's revenue growing 5% in the last quarter of 2012 over the previous quarter, this is the 5th quarter in a row Rackspace has seen a reduction in revenues.
The news saw Rackspace shares loose 10% of their value on announcement. Whereas the company's shares gained 38% over the last six months, last Tuesday saw the company's share value go down to $67.80 from $74.98 after extended trading on the New York Stock Exchange.
Rackspace saw the number of servers it operates increase from 89,051 in the third quarter of 2012 to 90,524 servers in the final quarter of 2012. In addition, the number of customers it caters to went up to 205,538 from 197,635 in the same period. However, analysts suggest that Rackspace's financial results underscore the impact of the cloud on web hosting.
Companies are transitioning away from traditional hosting approaches in a bid to reduce costs, and now more frequently use the cloud for data storage and software provision. Rackspace customers traditionally rented servers or server space to meet their hosting needs, and although the company offers an Open Cloud initiative (OpenStack), transition to its cloud solution was cited as being one reason for a slowing in the company's growth. Customers will take 3 to 6 months to complete a voluntary transition to its cloud solution.
In a conference call to shareholders, Jason Luce, VP of Finance at Rackspace suggested that risks and uncertainties for the company in 2013 include "market acceptance of our public cloud platform and products" and the "continued adoption of OpenStack as the open-source cloud computing platform standard". In the same conference call, Lanham Napier, the company's CEO suggested, "As we think about 2013, there are four main themes. Number one, cloud's technology paradigm shift that is happening now and this shift is an incredible opportunity for our company. Number two, businesses of all sizes are demanding open cloud technologies in the new cloud world. Number three, OpenStack is the open cloud standard. Number four, as the co-founder of OpenStack, Rackspace is well positioned to lead the open cloud movement."
Despite disappointing results, as Mr. Napier suggested, Rackspace seems well positioned to benefit from the global transition to the cloud. On February 13, 2013 the company announced it had been named a "Top Performer" in Hosted Private Cloud by Forrester Research Inc. Forrester's report considered Rackspace’s full Private Cloud portfolio including Managed Virtualization and Rackspace Managed Private Cloud powered by OpenStack to determine its results.
