Rackspace Hosting, Inc. (RAX) recently announced changes to its management. It has appointed Kevin Costello to its board of directors who previously served as the president of Ariba, Inc.
Having served as the president of Ariba for six years, he has the requisite leadership qualities. In 2012, Ariba was acquired by SAP SE. Costello continued to work as the president and successfully steered the companies through tactical initiatives. We expect him to emulate similar success at Rackspace. Costello has also served for more than 25 years as a leader in the SaaS space.
Costello brings to Rackspace extensive experience in consulting and advisory along with global business insight in both cloud computing and commerce management solutions. With his leadership traits, expertise and experience, he is expected to unlock further value. We believe that Costello’s sector know-how will prove beneficial for Rackspace.
In addition, Costello previously served as a senior management at Andersen Business Consulting. With such extensive experience in the world of technology, Costello is likely to be an asset for Rackspace. We believe that Costello will employ better strategies and take Rackspace to newer heights in a changing demand scenario.
Rackspace already remains on growth trajectory and posted better-than-expected third-quarter of fiscal 2014 results. Its earnings per share of 18 cents surpassed the Zacks Consensus Estimate of 16 cents and also improved from 11 cents reported in the year-ago quarter. Moreover, the company’s sales jumped 18.3% to $459.8 million.
The company’s large number of clients (it recently acquired 300k customers globally) and the partnership with Google (GOOGL) are expected to strengthen its position in the hybrid cloud computing market. Hybrid clouds comprise features of both public and private clouds and are much more secure than public ones.
However, competition in the Infrastructure-as-a-Service (IaaS) market is intense, particularly with players like Amazon (AMZN) and behemoths like Microsoft (MSFT) willing to price aggressively. This could remain a headwind.
Currently, Rackspace has a Zacks Rank #2 (Buy).
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