Rackspace CEO Rhodes: Just months on the job and look at our swollen digits

Sales bounce at cloud biz

Taylor Rhodes, the latest man to grab the CEO chair at Rackspace, must have, er, racked up the celebratory drinks last night as the hoster-come-cloud-flogger reported a comparatively decent set of Q3 fiscal ’15 financials.

The Texan-based biz reported revenues of $460m, up 4.2 per on last quarter and 18.3 per cent higher than the same period a year ago, excluding the impact of foreign exchange conversions.

This walloped Wall Street expectations with analysts’ consensus estimates coming in at $458.62m, some $1.16m lower than the reality.

“We are poised to capitalise on the massive opportunity ahead in the managed cloud market,” said Rhodes.

The company vet got the top job in September and so must be grateful to start his reign on a high, but means bigger things will be expected on him from here on in and this point is obviously not lost on him.

“We’re determined to continually improve our execution and seize our future”.

The traditional hosting business, which Rackspace refers to as dedicated cloud, jumped 14 per cent to $319.6m, and despite the company withdrawing from rivals’ frenzied price cutting, the public cloud division also grew 14 per cent to $140.1m.

The number of servers deployed worldwide reached a little over 110k, versus 101k a year earlier, and the average monthly revenue per server raced to a record $1,405 from $1,290.

Total costs went up to $419m from $360.8m, but net profit widened to $25.74m, up 36.6 per cent year-on-year and up from the $22.45m last quarter.

Return on working capital leapt to 11.7 per cent as gross margin hit 68.9 per cent compared to 67.2 per cent in the same quarter of fiscal ’14 (March to March).

All of the above indicate Rackspace was right to spurn the affections of suitors that had a different valuation of the business than the exec team.

Maybe Rhodes was right when he told us that this cloud thing is going to be big.

Rackspace forecast sales of $469m to $476m in Q4. ®

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