Rackspace posts solid financial results, continues to bang drum for managed cloud services

Picture credit: "Rackspace", by "Scott Beale/Laughing Squid", used under CC BY NC-ND / Modified from original

Rackspace has announced solid fourth quarter financial results, with adjusted EBIDTA at $165m, up 25% year on year, and net revenue up 16.4% from Q413.

Net income for the fourth quarter was $36.9m, up 5.1% year on year, while return on capital in the quarter went up to 15.5% from 9.6% in 2013.

The company’s primary USP in 2014 was its Managed Cloud portfolio, launched in July, aiming to give flexibility on managed services but with DIY-styled pricing. Not surprisingly the managed cloud ethos is one CEO Taylor Rhodes feels as extremely important to the company going forward.

“The cloud market is bifurcating into two distinct categories – unmanaged cloud and managed cloud,” he told analysts according to a Seeking Alpha transcript. “Rackspace has emerged as the company best positioned to dominate the managed cloud segment of the market.

“We’re now competing primarily against large telecom companies and legacy providers of IT hardware and services, most of whom are struggling to adapt to the demands of the cloud era,” he added.

Rhodes sees this as a clear gap in the market for Rackspace. “We intend to dominate this part of the cloud market,” he said. “Going into 2015 we look forward to demonstrating to customers and investors the success of our strategy and our position as the world’s number one managed cloud company.”

It’s been, all told, an interesting year for Rackspace. The company was shocked by the retirement of CEO Lanham Napier in February 2014, citing Rackspace’s strength in OpenStack and hybrid cloud as good reasons to step aside. In September the company announced Rhodes as its new CEO, as well as confirming it was continuing with its standalone trajectory and dismissing any merger and acquisition talk.

Even though the company’s press material argued it had taken this decision of its own free will, not everybody was convinced, with Forbes columnist Ben Kepes writing that he was “worried...before this potential sellout was announced, and nothing seen since has changed [his] perspective.”

The company’s branding is an interesting point. Even though it’s full steam ahead for managed cloud, Rackspace continues to be lumped in with the likes of Amazon, IBM and Google for cloud infrastructure – and comes off a fairly poor relation. Yet the company insists this is not the company’s strength. Nigel Beighton, VP technology, told CloudTech in July it was a ‘good marketing challenge’.

“I’m forever explaining the difference to people and I think I still will be going forward, just because you’ve got some very strong players in the market,” he said.

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