Rackspace Needs to Find Its Rhythm

Last November, what passes for a freak accident on the information superhighway sideswiped Rackspace(RAX Quote).

A truck -- an actual, real-life truck composed of a serious mass of molecules -- slammed into a utility transformer, depriving Rackspace of power at a crucial data center.

It was Rackspace's misfortune that a truck showed up again -- metaphorically, this time -- to derail its carefully planned IPO. Rackspace had lined up a strong crew of underwriters -- Goldman, Merrill, Credit Suisse -- who helped compile a clear, informative prospectus. Even in this parsimonious IPO market, it was expected to go well.

It didn't. Rackspace closed its first trading day at $10.01, a far cry from its pricing at $12.50, which was near the bottom of the $12-$16 range initially proposed. It's never very felicitous when a newly listed stock closes below $10 a share -- let alone on its first day. Rackspace managed to avoid this fate by two cents.

On Monday, the stock joined the broader market's continuing rally, jumping nearly 9% in recent trading to $10.90.

But what happened to this once mouth-watering offering? Can it all be blamed on that dastardly truck? Or is the market simply hostile to tech IPOs, regardless of quality?

Rackspace was heralded as the end of a drought in venture-backed technology IPOs. It had a brand image for good customer service --"Fanatical Support," to borrow the marketing department term (their caps, not mine). It has shown growing revenue and profit. And best of all, it had a feel-good buzz phrase -- "cloud computing" -- peppered throughout its prospectus: "Cloud" appears 23 times in the document.