Rackspace To Post Q2 After Bell; Analyst Sees Upside Surprise

Rackspace Hosting Inc.'sPanigrahi

uncertain prospects as a stand-along company haven't hurt it with customers, an analsyt said Monday. Rackspace, rumored for months as a takeover target or going private candidate, is set to post earnings later Monday and Credit Suisse's Sitikantha Panigrahi is at least one analyst expecting an upside surprise. Wall Street expects second-quarter earnings of 16 cents a share, on revenue of $437 million, while since January, Raxspace shares have fallen nearly 21 percent. But while Wall Street worries about fierce price competition for cloud services from the likes of Google and Amazon, Panigrahi rates Rackspace at Out Perform with a $40 target. Panigrahi said Rackspace is shifting strategy toward managed hosting and hybrid cloud offerings. Along with a second-quarter beat, Panigrahi expects Racspace to provide third-quarter guidance above Street estimates. Back in May Rackspace hired Morgan Stanley to evaluate "multiple strategic proposals" the company said it had received, including acquisition offers and partnerships. Subsequently Hewlett Packard supposedly offered $43 a share, in a deal that never materialized. In July, TechCrunch said the company and lined up financing to take itself private, and an announcement to that effect was supposedly imminent. Panigrahi said his channel checks suggest customers are unmoved by the uncertainty. Rackspace traded recently up 2 percent to $31.04.