A Few Reasons to Invest in Rackspace for the Long Run

Rackspace Hosting (RAX, Financial) reported solid results for the third quarter that came above the analysts' expectations along with year over year growth in both revenue and profit. These are encouraging results amid intensifying price competition from peers such as Google (GOOG, Financial) and Microsoft (MSFT, Financial) among others. Led by its robust performance the stock yanked to its 52-week high. But now the big question is where the stock is heading from here and what can we expect from it in the days ahead.

The way forward

Over the years, various companies have evolved in the Cloud business, which is divided in two categories, namely Managed Cloud and Unmanaged Cloud segments. Rackspace deals in the Managed Cloud segment, which offers value-added services in conjunction with computing infrastructure. And this segment has an edge over its counterpart since Managed Cloud offers its customers economies of expertise. Using this service, customers can stay focused on developing their key products while staying fast and lean. As the awareness of managed cloud services increase, it will offer huge opportunities for the Cloud industry.

And with its initiatives Rackspace has become one of the key players of the managed services market, which was once dominated by giant IT equipment companies such as Hewlett-Packard (HPQ, Financial) and IBM (IBM, Financial).

Gaining traction

In fact, Rackspace is gaining business from some of the native Cloud companies, which are dissatisfied with the do-it-yourself, one-size-fits-all model provided by the unmanaged cloud players. In this direction it has partnered with Google to provide Support for the all Google Apps related to Work technology suite including Gmail, Drives and Hangouts. Rackspace also joined hands with Microsoft, to provide support for its cloud platform including Windows Server with Hyper-V, System Center and Azure Pack. This will further add to its top line in the days ahead.

In spite of these tailwinds, we cannot neglect that Rackspace is in the midst of an intense competition from giants such as Amazon and its likes, which have deep pockets to sustain its long term growth. Investors and analysts have raised eyebrows since Rackspace called off a possible acquisition of the company on the wake of not finding a suitable suitor. Although, the management has assured that it is capable of standing alone and will emerge as a prominent name in the cloud industry. It will be a matter of time to see how things turn out for the company.

Conclusion

Going forward, the company has worked out a $500 million share repurchase agreement, which will improve its share holder