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Rackspace began trading 11 days ago as of this writing …my analysis.

At HostingCon, during one of the panels the speaker brought up the Rackspace IPO, he bet the strike price would be  $14 – sounds good to me – Another panel member piped in confidently “I bet it’s $12” – sounds good to me.

We all enjoy the water cooler, on stage you have to say something memorable. Now we know that Rackspace is trading around $10 - about a 20% drop from the IPO day.  The sky is falling. Regardless of the first few baby steps Rackspace is still a good company, still good price and was a good deal.  Unless you actually bought at the IPO price (sorry by the say) you don’t care.

One of my clients called, he had reviewed the Rackspace IPO.  He told me that Rackspace sold for 4plus X 2007 revenues; this is a valuation  – sounds good to me.

Actually my client fully recognizes the Rackspace value does not apply to his company. Even though the product lines are almost identical, how do you compare a $6 million firm with Rackspace at $500 million? Don’t spend too much time doing this exercise.

One of the articles I reviewed for this in-depth analysis wondered why Rackspace went public in this down market.  It stated Rackspace has some great investors like Norwest Venture Partners and Sequoia Capital suggesting they should have advised otherwise – I guess they let Rackspace down.

That’s not the venture capital groups’ job. Their job is to take risk and obtain reward. The Investors cashed out, nothing wrong with that. You can’t stay in forever. They took a bet on Rackspace management and vice-versa.

Should not the underwriters (Goldman, Sachs, Credit Suisse et al) advised Rackspace management to hold off the IPO in this down market?  Ethics battle – Aristotle vs. Kierkegaard

I can see the meeting now..."...markets off a bit – of yes Rackspace, should we consider moving back…"

Did you know that most of the underwriter’s fees come from pushing that $1 billion in stock out the back door?

This is now history.  All motivations have subsided. It was a good deal as all parties, including the new shareholders who got what they bargained for. 

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In the weeks leading to what is considered the web hosting industry's largest event, the WHIR reported that iNET Interactive, a social media company that owns the popular web hosting community Web Hosting Talk among other web properties, rather unexpectedly announced that it had acquired the HostingCon conference and trade show from Interjuncture.

Although the "feel" of conference remained relatively unaltered this year there were several iNET folks running around the event to answer questions about the recent acquisition and to gather information on what they could keep the same next year and what they should consider changing.

We sat down with Troy Augustine, the CEO of iNET Interactive, to discuss some of the motivations behind the acquisition and what we can expect to see from next year's event.

(Note: If you want to skip what I say and go right to the sign-up page, here's your link)

Otherwise, fasten your fun-belts!

Cisco's TechWise TV is set to "air" an episode called "Energy Efficiency in the Data Center," this Thursday, August 21 at 11:00 a.m. Eastern, which ought to be enough of a reason for a blog post.

It took a little bit of digging for me to figure out exactly what TechWise TV is, and apparently I'm a little bit behind on the subject, because it's been running since September of 2006.

It's a TV-show style web broadcast produced by Cisco and covering a range of technology topics. Most of the time it deals with Cisco products, but apparently not always.

I think I was tipped off about this particular episode because it's especially relevant to the hosting community. Anyone who reads the WHIR regularly knows we've put a lot of energy into covering green technology and its place in the data center - with our "green issue" of WHIR magazine, among other things.

Cisco is keen to get its energy efficiency message to hosting providers, which could be good news for hosting providers, depending on how effective that message is.

There's a lot of information on offer from the company regarding energy efficiency, and part of the episode is given over to a discussion of the company's efficiency assurance program, which includes planning and assessment tools for determining the efficiency of your facilities, as well as a ton of video content relating to efficient data center design. There's a lot of material on this section of the company's website, but check the "access interactive tool" link in the far right column of the page to pull up most of it.

There's a trailer for the episode hosted on YouTube. It's short, but it gives you a sense of what to expect from the episode.

In particular, the episode (I've previewed a good chunk, but haven't had time yet to watch the entire thing) discusses the fact that energy efficiency is a goal in IT operations not simply for altruistic reasons, but for the sake of its bottom-line impact. We've discussed this before - server power and cooling together make up most of the ongoing cost of operating a data center. And employing more efficient technology can reduce that cost considerably.

The program covers some key steps that data center operators can take to increase the efficiency in their businesses immediately without an overwhelming amount of investment - virtualization (in the network, in the storage area and of course on the server) being a key element in efficiency.

Overall, it's good advice, but nothing you haven't already heard if you're attuned to the problems of energy efficiency you face as data center operators. The real value in the episode has to do with some of the specific solutions (from Cisco, and from a variety of other companies) that are addressed. Might give you something to think about.

Of course, nothing is specifically for sale at this point. It's a free presentation. And along with the "live" airing next Thursday morning, there will be experts on hand answering user submitted questions via the website.

You can sign up for the session by visiting this link.

As mentioned in a recent post by David Snead, managed hosting company Rackspace has gone public. The company began trading on the New York Stock Exchange last week under the ticker symbol ‘RAX’. A complete financial overview can found at Google finance.

The IPO shares were distributed via a Dutch Auction mechanism – made famous by Google when it went public in 2004. The stock was issued at $12.50. From the Rackspace press release regarding the IPO: ‘’ Rackspace announced the initial public offering of 15,000,000 shares of its common stock at a price of $12.50 per share. Rackspace will offer 12,700,000 shares of its common stock in the offering and the selling stockholders will offer an additional 2,300,000 shares of common stock in the offering. Rackspace and the selling stockholders have also granted the underwriters a 30-day option to purchase up to an additional 2,250,000 shares to cover over-allotments. Rackspace's common stock will begin trading on the New York Stock Exchange under the symbol "RAX" on Friday, August 8, 2008.’’

Almost immediately after trading began, the stock price dropped around 20% and has hovered in that range ever since. As of the publication of this article, the current stock price is $10.37 yielding a market capitalization of $1.2 billion.

However, an important question remains unanswered: “Is Rackspace worth $1.2 billion?”. The current market price seems to indicated yes. Despite that, there remains the issue of future performance and earnings expectations to solidify the current market cap. A nagging thorn in the side of the company’s valuation is the Price to Earnings ratio.

At the current market price, RAX is trading at over 58 times earnings – that is, the P/E is 58.26. This is pretty high by any analysis, indicating an expectation of torrid growth in the coming quarters. However, when compared to other market leaders in the online space, Rackspace begins to look seriously overvalued – even at the 20% discount to the issuing price. For comparison:

Google – P/E = 32.75
Microsoft – P/E = 14.81
Yahoo – P/E = 27.44
Cisco – P/E = 18.75

It is possible that Rackspace justifies the current valuation and that the company will shock and surprise investors with incredible upside when they next report earnings. That’s just what Google did when it went public. However, if the first earnings reports are anything less than spectacular – it’s likely that Rackspace won’t be worth $1.2 billion anymore.

This content is provided courtesy of the managed dedicated server experts at HostMySite.com.