Service Providers Return Solid Financial Results


A couple of managed services providers this week reported better revenue and earnings than last year for the third quarter of 2008 and show that the economic downturn's impact is inconsistent across various market segments.

Rackspace Hosting, the San Antonio, Texas-based hosting services provider, said revenue grew 44 percent over last year and reported strong earnings for its third quarter, which ended Sept. 30.

And Incentra Solutions, a Boulder, Colo.-based IT services and solution provider, said its third-quarter revenue soared 52 percent while its losses fell year-over-year.

Rackspace on Wednesday reported revenue for the third quarter of $138.4 million, which was up 44.0 percent compared to the third quarter of 2007. Revenue in the quarter was negatively impacted by the recent depreciation of the British Pound relative to the U.S. dollar, the company said.

Rackspace also reported earnings of $5.2 million during the quarter, but did not provide comparison figures for last year as the company went public in August. However, it did say that adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter rose 39.7 percent over last year to $37.0 million.

Rackspace also said that it is reducing its anticipated capital expenditures estimate for 2008 from $310 million to $270 million, thanks to revised build-out plans for its data centers, as well as a drop in customer equipment spending due to improved pricing, an increase in the recycling of older equipment and a strengthening dollar.

Going forward, the company is investing at least $20 million in building its new Asian headquarters and data center in Hong Kong.

It is also in the process of integrating two recent acquisitions. They include Slicehost, which brings technology for Xen-based virtual machine hosting, and Jungle Disk, an online storage backup provider.

Incentra on Tuesday reported revenue during its third quarter of $55.1 million, up 52 percent from the $36.4 million reported last year. The company lost $2.1 million during the quarter compared to a loss of $2.5 million last year.

The company expects revenue for all of 2008 to be between $212 million and $220 million, or about 45 percent to 50 percent higher than in 2007, and that it will be cash-flow positive for the year.