Rackspace Files for IPO

For those of you that haven’t heard, managed hosting company, Rackspace, has filed the paperwork persuant to an initial public offering (IPO) of stock. Here are a few of the highlights from the S-1 documents filed with the United States Securities and Exchange Commission:

Rackspace has traditionally offered managed dedicated servers and more recently, hosted email services. In the S-1 documents, here is how Rackspace describes its business. ”We deliver websites, web-based IT systems, and computing as a service. Our rapid growth is the result of our commitment to serving our customers, known as Fanatical Support, and our exclusive focus on hosting.

Hosting providers offer services to support websites, web-based IT systems, and computing. The equipment required (servers, routers, switches, firewalls, load balancers, cabinets, software, wiring, etc.) to deliver services is typically purchased and managed by the hosting provider. As a result, hosting providers reduce customers’ initial capital investment and ongoing operating costs. Hosting also reduces the complexity of deploying and managing IT systems and computing, and changes the way companies purchase these products and services. Rackspace offers a full suite of hosting services, including dedicated hosting, managed hosting, and email hosting, as well as emerging services such as platform hosting and cloud hosting.”

According to the S-1 documents, the following financial services companies are designated as underwriters of the shares, Goldman, Sachs & Co., Credit Suisse, Merrill Lynch & Co. and WR Hambrecht + Co.

Rackspace has been growing substantially over the past few years. The filing outlines that Rackspace has grown net revenue over the past five years from $56.6 million in 2003 to $362.0 million in 2007, representing an annual growth rate of 59.0%. During the same five year period, the company grew net income from $208,000 to $17.8 million.

So how will Rackspace pay back thier investors and shareholders? By growing even more of course! Here is the statement regarding the company’s prospects moving forward:

”Our vision is to be recognized as one of the world’s great service companies. Our goal is to expand our leadership position in hosting around the world, and our strategy for accomplishing this goal includes the following key elements:

Add New Customers. We intend to continue our focus on aggressively acquiring profitable new customers.

Keep Existing Customers for Life and Sell Existing Customers More Services. When we serve customers well, they generally stay with us and buy more services. This means each customer has the potential to generate significant lifetime economic value.

Add New Services. Our goal is to add new services to meet our customers’ growing needs.

Expand Globally. We intend to expand further into continental Europe and to Asia.

Continue to Invest in Our Culture and Hire the Best People. We intend to continue our highly selective hiring process and maintain a work environment that encourages passionate, engaged Rackers.”

Reagrdless of the outcome of this filing, it is a great step forward for Rackspace. The publicity surround the potential for an IPO is boosting the entire web hosting industry. I wish Rackspace well in capitalizing on this fantastic opportunity!

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