Market Overview

Some Highlights from Rackspace's Q1 Earnings Conference Call

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The executives at Rackspace (NYSE: RAX) spoke confidently and positively in their Q1 conference call to investors on Monday May 12th. They addressed multiple different points including competition, the company's overall direction for the future, and financial guidance. Competition

  • IBM biggest competitor to Rackspace in managed cloud market.
  • Amazon, Google, and Microsoft while they have cut their prices in this sector, they do not offer the same hybrid services as Rackspace and offer unmanaged infrastructure while Rackspace is managed.
  • Taylor Rhodes, President “We have much more experience truly in running hybrid clouds than IBM does, so we feel good about that.”

Company's Direction

  • Taylor Rhodes, President “We think really this is sort of inning two of a seven-game series of the cloud era. It's early days, and we feel like we're going to be the natural heir for the mainstream market that is really deciding not to go invest in running and owning everything.”
  • Rackspace is focusing on selling their expertise and a large array of services rather than just basic raw infrastructure.

Financial Results and Guidance

  • Karl Pichler, CFO “Recall that one of our stated goals for 2014 is to improve capital efficiency by driving capital expenditures down towards 25% of revenue. In the first quarter, total capital expenditures came to $101 million in the quarter, representing 24% of revenue. Obviously, this is a good start, and we feel good about delivering on our goal to improve capital efficiency for the year.”
  • Expect to continue with growth for Q2
  • Investors should be cautious of Karl Pichler's statement regarding financial guidance, “While we provided quarterly guidance on this call, we will continue to evaluate whether we will provide both quarterly and annual guidance in the future.”

Miscellaneous

  • Announced contract with large but undisclosed company, quoted as “one of the largest new customers in Rackspace's history”
  • Rackspace will be bringing one day conferences to cities all around the world beginning in July to directly communicate with its market.

Posted-In: Earnings News

 

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