FIN 560: Course Project
February 22, 2015
Professor Muleka Kikwebati
Rackspace Hosting, Inc. (RAX) operates in the hosting and cloud computing industry. It offers its products under the Fanatical Support brand. Rackspace is now a global company with more than 200,000 customers in 120 countries and $1.5 billion in annual revenue headquartered in San Antonio, Texas with 9 data center facilities spanning three continents. Prior to their shift into cloud hosting, Rackspace focused on managed hosting, competing with companies such as Peer1. Now, Rackspace has proclaimed itself to be the “world’s leading specialist in the hosting and cloud computing industry“, fighting for that title with industry titans Amazon and Google. This essay will discuss Rackspace’s competitive forces in the industry, including the company 's relative advantages and disadvantages to its competitors. In comparison to the competitors, this paper will provide an analysis of return on equity; projected earnings growth; required rate of return using the CAPM measurement; and the intrinsic value using the discount valuation techniques. After providing these analyses, I will conclude a recommendation to buy or sell RAX and the estimated price target. Rackspace main competitors are Amazon (AMZN) and Google (GOOG). Amazon’s Web Services, or AWS, is a cloud-based web service platform that provides customers with the tools they need to create and maintain online applications, manage server space, track web data and more. Google’s Cloud Platform provides the building blocks so you can quickly develop everything from simple websites to complex applications. Rackspace has a list of many other competitors but Amazon and Google are direct competitors that continue to challenge the company.
Rackspace’s competitive advantage that will separate them from the others and ensure profitability are open source architecture, customer support, expansion to niche clientele, and employee
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