IPO Watch: RackSpace

Data-center company could benefit from "cloud computing" revolution.

By + More

Corrected on 5/22/08: An earlier version of this post incorrectly named the blog 37signals.

A Web hosting company is going public—in 2008. It's worth keeping a cautious eye on.

This summer RackSpace, a data-center manager, is planning a $400 million auction-style (or Google-style, if you prefer) initial public offering. The company runs eight data centers, four in the United States and four in Britain, and is joining a crowd to be part of the "cloud computing" revolution.

It's hard to dislike a profitable IPO candidate in a growing field. RackSpace's revenue grew to $362 million in 2007, up almost 62 percent from the previous year, according to its S1 filing. Net income shrunk a bit but remains solid at $17.8 million last year. Tier1 Research predicts the hosting market will grow 26 percent a year between 2007 and 2010.

IPO analysts say RackSpace's offering (no date as of yet, and no price) gets some credibility because of the participation of big names Goldman Sachs, Credit Suisse, Merrill Lynch, and WR Hambrecht. The company is also backed by venture capital giants Sequoia Capital and Norwest Venture Partners.

So what's not to like? Well, there's market sentiment, for one. At a time when the IPO market is soft, there's little reason to expect an explosion on the first trading day, says David Menlow, CEO of ipofinanical.com. Also, it's the company's second go at an offering; the first failed in the 2000 dot-com crash.

Valleywag has tracked service outages and customer woes, most recently with Tumblr. Last November, an errant truck crashed into a power transformer near Dallas, and the surge cut service to a big chunk of RackSpace customers (including popular blogs 37signals and Laughing Squid).

The company is also moving into the "cloud computing" business with its Mosso service, plus E-mail services stemming from its purchase of MailTrust last year.

Watch for further details here.

Further reading:


More Valleywag

Plus, earlier this year Scobelizer took a tour of RackSpace's new home in a formerly run-down San Antonio mall.