Baron Funds Comments on Rackspace Hosting
Rackspace Hosting, Inc. (RAX) is a leading hosting and cloud computing service provider. Cloud computing describes a paradigm shift in the way IT infrastructure is built and consumed. Users can purchase only the computing, storage or networking capacity they need from a third party, paying for it monthly as a service, rather than buying and managing the equipment themselves – like we all pay the local utility only for the electricity we use rather than owning our own generators. Rackspace's business has been growing around 30%, and we expect it to grow 20-30% for many years to come. The stock pulled back because of increased investment spending and investor uncertainty around the company's rollout of its new cloud platform, OpenStack, which is set to go live on August 1st. We saw this as an opportunity to significantly increase our position.