Yesterday Rackspace posted nice earnings, saw its longtime CEO retire, and announced a shift in focus toward the hybrid cloud. Shares were trading rather lower after hours and in the premarket as the uncertainty of the last two overwhelmed the promise of the first.
Revenue of $408 million and earnings per share of $0.21 were ahead of expectations. CEO Lanham Napier is retiring, and the company’s chairman Graham Weston is stepping into the breech. But the longer-lasting news is that the company’s primary target is now the hybrid cloud and the software and services to empower enterprises with them.
In other words, Rackspace plans to become more and more of a service provider and less of what we used to call a webhosting company. And while they’re still operating that public cloud and posting pretty good growth and earnings doing it, it is clear that they are looking hard for places to differentiate from their larger neighbor at Amazon AWS and move up-market.
The cloud marketplace is a complex place where a lot of previously very different business models are starting to converge on overlapping territory. It seems that CLECs, systems integrators, global telecommunications providers, and webhosting providers that have dived into the cloud are increasingly singing the same tune: the technologies underlying the public, private, and hybrid clouds out there must start to mature into more manageable services that enterprises not at the bleeding edge can consume, and everyone is uniquely positioned to help them do it. They’re not all aiming at the same targets of course, but those targets do seem to be getting closer together every quarter.
As for Rackspace, they are indeed well positioned to take on the hybrid cloud challenge. But for investors, if we have learned anything in the world of IT it is that transitions to new targets tend to be harder than the marketing guys make it look. Hence the stock price.
This article was authored by Rob Powell and was originally posted on Telecomramblings.com
Rob Powell is founder & editor of Telecom Ramblings, which was set up in 2008. The website is dedicated to discussing trends and developments in the telecom industry.