High-Flyer Rackspace Runs Into a Price War in the Cloud
August 2, 2013
Grazed from WSJ. Author: Drew Fitzgerald.
Rackspace RAX -0.80% Hosting bet its future on the cloud last year. It has spent most of the past six months losing altitude. The company’s second quarter earnings report next Thursday will show whether the one-time high flyer is turning things around.
It turns out the business of renting computer power over the Internet is more cutthroat than thought, with fast growth tempered by regular price declines. Rackspace’s stock soared 73% last year until its earnings reports showed its original business of running private data centers stalling out. That troubling sign caused shares to tumble this spring even as the broader market rallied. Rackspace is now off 38% this year…
Cloud pioneers like Amazon.com AMZN -0.42% have defended their foothold in the fast-growing industry by using massive economies of scale to slash prices. Meanwhile, Rackspace’s older server-hosting model has suffered as executives aggressively market their new “public” cloud…
Read more from the source @ http://blogs.wsj.com/corporate-intelligence/2013/08/02/high-flyer-rackspace-runs-into-a-price-war-in-the-cloud/