Rackspace Delivers a Billion Reasons Why Cloud Works

By Sean Michael Kerner | Feb 15, 2012 | Print this Page
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There is a silver lining in the cloud, just ask Rackspace Hosting (NYSE:RAX). Rackspace reported fourth quarter fiscal 2011 and full year earnings this week, with revenues exceeding $1 billion for the first time in the twelve year history of the company.

Rackspace is reaping the rewards of its cloud hosting efforts and is positioned to benefit even further as they transition fully to the open source OpenStack model they helped to pioneer.

"2011 was an absolute breakout year for Rackspace that was accentuated by the strongest quarter prior to the recession hitting in mid-2008," Lanham Napier, CEO at Rackspace, said during the company's earnings call. "During the year we accelerated our revenue growth for the second year in a row and crossed $1 billion in annual revenue."

For the fourth quarter, Rackspace reported net revenues of $283 million which is a 32 percent year-over-year gain. Net income for the fourth quarter was reported at $25 million, for an annual growth rate of 85 percent. For the full fiscal 2011 year, Rackspace's revenues came in a $1.03 Billion and full year net income was reported at $76.4 million.

The company has been on a steady revenue growth curve over the last three years and Napier said that revenue growth for 2011 year accelerated to 31 percent, up from 24 percent in 2010 and 18 percent in 2009.

"The primary drivers for the increased growth trajectory are owed to continued growth in our public cloud offering," Napier said. "Our public cloud business grew 88 percent in 2011 and now represents more than 20 percent of our total revenue."

openstack logoRackspace is also evolving OpenStack to become a key part of their business. OpenStack is an open source cloud platform that Rackspace co-founded with NASA in 2010. There are now over 140 vendor partners in the OpenSpace ecosystem including Cisco, AT&T, HP and Dell.

While Rackspace today has a number of OpenStack powered commercial offerings including the Rackspace Cloud Private Edition, their primary hosting business does not currently run on OpenStack.

"The migration of our cloud servers business to OpenStack remained in beta at the end of the year, so that is an example of the work we need to accomplish to further our position as the dominant service leader of the cloud computing market," Napier said. "Fully adopting OpenStack will be a critical pillar of the 2012 plan."

Napier added that OpenStack technology will underpin many of the new products that Rackspace plans to introduce in 2012 including Cloud Database and Cloud Firewall solutions.

"In addition, OpenStack will be the infrastructure underneath many of the new service levels we plan to introduce on top of our public cloud platform going forward," Napier said. "In short, OpenStack is becoming the foundation to support a much bigger and better business."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @TechJournalist.