This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Rackspace CEO Bets the (Server) Farm on 'Open Cloud'

Stocks in this article: RAX PFPT HPQ DELL CTXS

NEW YORK ( TheStreet) -- Only three years ago, companies were nervous about the potential security and management risks of sending critical data and services into the "cloud." Today, the cloud-computing industry has developed so rapidly that Rackspace (RAX) has put its faith in open-source cloud technology.

Rackspace developed OpenStack, an open-source cloud operating system in 2010, and is now cranking up its efforts around the technology. Earlier this month the San Antonio, Texas-based firm announced OpenStack-powered versions of its flagship Cloud Server offering. Rackspace also unveiled a Cloud Databases offering and a Control Panel product for managing the services, both built on OpenStack.

"We're working hard to build an open-cloud company," Rackspace CEO Lanham Napier said during an interview. Rackspace, he added, will launch additional open-cloud services during its third and fourth fiscal quarters.

Rackspace, which is one of TheStreet's top cloud stocks for 2012, reported robust second-quarter results earlier this week, although Napier's focus is firmly on the open cloud.

"We still have hard work ahead of us to meet our roadmap, but we're confident that we will get it done," he said, noting that high-performance storage, monitoring and backup products are scheduled for the third quarter. A cloud network product will make its debut the following quarter.

Open-source technology lets Rackspace quickly scale its own cloud infrastructure, according to the CEO, significantly boosting efficiency. "In the long run, I believe that there's the opportunity to improve our economics because the platform is more capable," he explained. "We will absolutely share a lot of that savings with our customers."

Rackspace, however, does not offer guidance, so investors are unable to measure the strategy's impact on the company's financials.

Nonetheless, Canaccord Genuity analyst Greg Miller sees open-source cloud computing as a positive for Rackspace. The strategy opens the door to much larger applications and customers that could generate higher margins for Rackspace, he said in a note, but added that no meaningful revenue is expected until the first quarter of 2013.

OpenStack, which supports both public and private clouds, also has the backing of over 180 companies, including heavy hitters HP (HPQ), Dell (DELL) and Citrix (CTXS).

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs