Rackspace breaks billion buck barrier in 2011

It took twelve years, but Rackspace Hosting has chalked up its first billion-dollar year – and it's hoping to get to $2bn in a lot less time, planning some new cloudy services to help make that happen.

In the quarter ended in December, Rackspace brought in $283.3m in revenues, up 32 per cent year-on-year, with net income of just over $25m, which was up a very healthy 85 per cent.

The company's dedicated cloud products – what we used to call managed hosting – accounted for $224.8m in revenues, up 23 per cent, while its public cloud services (multitenant, virtualized gear) pushed $58.5m in revenues, skyrocketing 86 per cent.

For the year, Rackspace had $1.03bn in revenues, increasing 31 per cent, and net income hit $76.4m, rising 65 per cent. Dedicated clouds accounted for $835.9m in revenues in 2011, up 23 per cent, while public cloud services brought in $189.2m, up a hefty 88 per cent.

At the end of 2010, Rackspace had 66,015 servers and 130,291 customers, and in the past year it has added 13,790 servers, a 21 per cent increase, and was able to push its customer base to 170,510 companies, a jump of 32 per cent. Right there, you can see why Rackspace is so hot to trot on cloud computing: when people share servers thanks to virtualization, you can cram more people onto fewer boxes and squeeze out some more profits. The average revenue per server was $1,191 in December 2011, up from $1,101 a year earlier.

In a conference call with Wall Street analysts after the market closed on Monday, Rackspace president and CEO Lanham Napier said that the company was progressing in its move to the OpenStack cloud fabric. The company is beta testing the compute cloud services and will eventually move its installed base of SliceHost customers to OpenStack's "Nova" compute cloud code, which was created by NASA and enhanced by a slew of OpenStack project partners. The company's Cloud Files Object Storage is already running the "Swift" storage-cloud code, which is derived from Rackspace's own code.

Napier said that while Rackspace was eager to get its entire public cloud infrastructure over to OpenStack, he conceded that "this is one of those 'first impressions last a long time' situations," and he was in no mood to put a stake in the ground and tell Wall Street when the transition would be done. He said that a number of customers have been involved in a beta test move from SliceHost to OpenStack Nova, and that Rackspace is satisfied with how it is going so far.

Rackspace has somewhere around 20.9 megawatts of data center capacity being utilized in the space it rents from data center operators, and has another 30.7 megawatts under contract that it can expand into as customer demand pushes it. Unlike Amazon, Google, and Yahoo!, Rackspace shows no interest in designing and building its own data centers, and is perfectly content to buy space for its racks wholesale.

Rackspace does not provide revenue guidance, but Napier said that the game plan for 2012 would be a carbon copy of the plan for 2011. The company expects to surf the cloud computing wave while at the same time adding new services to its infrastructure. Napier hinted that Cloud Block Storage, Cloud Database, and Cloud Firewall services were in the works for possible delivery this year.

Rackspace CFO Karl Pichler said in the call that the company would spend somewhere between $335m and $405m on capital expenses in 2012, with $25m to $35m being spent on data centers, $210m to $250m on various hardware to support its workloads, $75m to $85m on software development (including OpenStack contributions but also internally used code that does not make it into OpenStack), and $25m to $35m on offices and other facilities.

Rackspace ended the quarter with $159.9m in cash and no debts. The company exited 2011 with 4,040 employees, up 24 per cent over the past year. ®