Container Prospects Boost Rackable
Shares of Rackable (RACK) are stronger today after an upgrade from brokerage Canaccord Adams, which cited growth prospects for the company's ICE Cube line of containerized data centers. Rackable shares are 61 cents higher to $10.30 a share in afternoon trading, an improvement of 6.4 percent.
"We believe Rackable’s container business will become a key growth driver for the company," Canaccord Adams analysts wrote in upgrading the stock from Hold to Buy. "We believe that adoption of modular data centers by Internet-based companies such as Microsoft and Yahoo will provide Rackable a differentiated product, and a path to top-line growth."
Posted by Rich Miller 
April 21, 2008 | Permalink | Newsletter
April 04, 2008
Video: Rackable ICE Cube Container
This video features a brief tour of ICE Cube, the high-density data center inside a shipping container from Rackable Systems (RACK). Conor Malone, Director of Data Center Solutions for Rackable, provides a look inside the container and talks about the ICE Cube's features and how early customers are using the units. There's a lot of airflow from the cooling inside the unit, which creates some residual noise on the audio. Conor is clearly used to talking over the breeze, which helps. This video runs just over 3 minutes.
For more information, check out our coverage of the ICE Cube container, as well as our archive of stories about Rackable.
Posted by Rich Miller April 04, 2008 | Permalink | Newsletter
April 03, 2008
Whose Containers Will Microsoft Use?
So whose container-based data centers will Microsoft be using in its huge new Chicago data center? Microsoft said Tuesday that it will populate one floor of its $500 million facility with as many as 220 shipping containers filled with servers. The second floor of the immense facility will be a traditional raised-floor data center. Microsoft director of data center services Michael Manos said the company's new data center in Dublin, Ireland will also be built with this hybrid design.
Manos said Microsoft designed the specifications for the containerized data centers, but will not be building them. That's good news for at least one of the companies marketing "data center in a box" products, a group that includes Rackable Systems (RACK), Verari Systems and Sun Microsystems (JAVA).
We've previously noted that Microsoft's interest in containers could be a boon for Rackable. Microsoft is a major customer for Rackable, but neither company would confirm this week whether Microsoft owns any of Rackable's ICE Cube containers. Nobody's denying it, either.
One thing is certain: if Rackable is supplying Microsoft with containers, it's not alone. Microsoft has deployed at least one of Verari's FOREST containers at its data center in Boulder, Colorado.
Posted by Rich Miller April 03, 2008 | Permalink | Newsletter
March 13, 2008
Rackable Shares Dip on Auction Rate Risk
Shares of Rackable (RACK) are lower today due to investor reaction to Rackable's exposure to credit risk from auction rate securities. The company also disclosed that its auditor had found "material weaknesses" in the company's financial reporting. Shares of Rackable are down 33 cents to $8.24 in morning trading, a decline of about 3.8 percent. The stock had been up to 10 percent lower in pre-market trading.
In its 10K filing with the SEC, Rackable disclosed that it holds $9.1 million in auction rate securities, short-term investments that have been thrown into chaos by liquidity. Many investors who bought auction rate notes, including Rackable, have been unable to find bidders for periodic auctions to set the interest rate on the notes.
Posted by Rich Miller March 13, 2008 | Permalink | Newsletter
February 07, 2008
2008: Breakthrough Year for Containers?
Executives at Rackable (RACK) say 2008 will be a "breakthrough year for containerized data centers" and predict that the company will deploy at least 20 of its ICE Cube portables this year, and perhaps as many as 50. The company discussed the prospects for its container products during yesterday's earnings call with securities analysts.
Yahoo (YHOO) became the latest big Internet company to begin using a modular data center in a container, deploying one of Rackable's ICE Cube units to support the M45 Supercomputing Project with Carnegie Mellon University. The M45 project provides universites with access to a supercomputing platform which boasts 3 terabytes of memory, 1.5 petabytes of storage, and a peak performance of more than 27 trillion calculations per second.
Rackable also will ship three ICE Cubes to federal customers, and says there's more to come. "There is no doubt that from what we are seeing right now, '08 will be a breakthrough year in containerized data centers," Rackable CEO Mark Barrenechea said in the earnings call.
The focus on modular data centers is part of a broader shift at Rackable, which says it will have lower revenues in 2008 as it discontinues some low-margin deals. "It's obviously related to margin cost and distraction to other areas of innovation," said Barrenechea. "When I look out to new workloads, we want to focus our resources on new style data centers like the Ice Cube."
While companies always like to predict growth in critical high-margin business lines, Rackable's hopes for ICE Cube align with a broader transition in which container-based data centers are gaining traction.
Posted by Rich Miller February 07, 2008 | Permalink | Newsletter
February 05, 2008
Microhoo: 1,600 Pound Gorilla for Vendors?
Sometimes it's nice to have an "800-pound gorilla" as a customer. It's even better to have two of these huge companies as customers. But what happens if the two 800-pound gorillas merge? That's an important question in light of Microsoft's $44 billion bid for Yahoo (YHOO). Several publicly-held companies in the data center sector do big business with both Microsoft (MSFT) and Yahoo, to the extent that the two companies add up to half their revenues. Here are a couple of examples:
- Rackable (RACK) gets 57 percent of its revenues from its top three customers, which are Microsoft, Yahoo and Amazon (AMZN), with Amazon assumed to represent the smaller chunk of the three. Rackable's focus on DC power and energy-efficient servers has helped it gain traction among companies with the largest server farms. Its customer base has become more diverse with the emergence of Amazon's utility computing operation and the growth of Facebook, another large customer.
Posted by Rich Miller February 05, 2008 | Permalink | Newsletter
October 29, 2007
ICE Cube Portable Data Centers Deployed
Portable data centers have generated a lot of headlines and discussion, but we've seen few of them deployed and in use. The notable exception thus far has been the Project Blackbox installation at the Stanford Linear Accelerator Center (SLAC) in Palo Alto, Calif.
That appears to be changing. Rackable says it has shipped three units of its new ICE Cube containerized data center to existing customers, and said it expects to ship three more units to federal customers by mid-2008. ICE Cube is a new version of Rackable's Concentro portable data center offering a denser server environment and the option of a 20-foot container size.
Possible uses for portable data centers include field deployment in remote areas, transitional use during data center expansions, rapid addition of capacity for fast-growing start-ups, and as a mobile command centers for disaster or humanitarian relief projects. At least one provider is customizing Blackboxes to provide disaster recovery for online casinos.
Posted by Rich Miller October 29, 2007 | Permalink | Newsletter
Facebook Growth Boosts Results at Rackable
Sales of its high-density servers and racks to huge customers have been the bread and butter for Rackable (RACK), as Microsoft (MSFT) and Yahoo (YHOO) have historically accounted for about 60 percent of the company's sales. Last quarter analysts noted that sales to Amazon (AMZN) were helping Rackable's results, as the retailer buys hardware to support its utility computing platform.
In the latest quarterly earnings call, Rackable said it has added a fourth large customer, as Facebook is now among its top accounts. That relationship positions Rackable to benefit as Facebook beefs up its infrastructure in coming months. Facebook recently leased additional data center space from DuPont Fabros, and has cash to invest in the wake of fresh investment from Microsoft and venture capital firms. Facebook had 30.6 million visitors in September, according to data from comScore.
Posted by Rich Miller October 29, 2007 | Permalink | Newsletter
September 18, 2007
Rackable Offers Denser Portable Data Center
Rackable Systems, Inc. (RACK) today introduced ICE Cube, a new version of its Concentro portable data center, but featuring a denser server environment and the option of a smaller container size. ICE Cube features computing density levels of up to 11,200 processing cores or 4.1 Petabytes of storage in a standard 40 foot by 8 foot shipping container. The Concentro modular data center design was launched in March, 2007, when it joined Sun's Project Blackbox in the market for portable data centers.
Rackable also said that the new data center will be available in a 20-foot container as well as the original 40-foot Concentro design. The Blackbox is offered in a 20-foot shipping container, and Rackable's decision to offer ICE in a similar "form factor" may allow customers seeking portable data centers to make more direct comparisons between the two products.
ICE — short for the "Integrated Concentro Environment" - features nearly 20 percent greater density levels than Concentro, and additional configuration options inside the container. ICE Cube can be deployed with Rackable Systems’ new V Series line of virtualized servers. The company is also promising a faster delivery schedule for ICE, saying it can design, build and deliver a fully populated ICE Cube to customers in a matter of weeks.
Posted by Rich Miller September 18, 2007 | Permalink | Newsletter
August 31, 2007
Amazon's Growth Helping Rackable
The growth of Amazon's utility infrastructure business is boosting results at Rackable (RACK), which supplies data center equipment for the giant retailer, according to a securities analyst. Thomas Curlin of RBC Capital Markets said yesterday that Rackable's rate of orders is improving. "Our checks suggest the flow of orders at Rackable is improving as Amazon laps tough year-over-year comparables and other key customer relationships remain stable," Curlin wrote, adding that his third quarter revenue estimate for Rackable of $90 million "may prove conservative." Investors liked the news, as Rackable shares closed Thursday at $13.60, up from $12.07 at Tuesday's close for a two-day gain of 12.6 percent.
Rackable's revenues are driven by its large customers, with Microsoft and Yahoo accounting for nearly 60% of revenue. Executives at Amazon (AMZN) have described the growth of the company's infrastructure business in only vague terms in their analyst calls, emphasizing that its new line of business (which includes the S3 and EC2 services) is in the early stages of a much bigger long-term game. But the Rackable news confirms that the growth of these new services is prompting some serious infrastructure investments for Amazon.
Posted by Rich Miller August 31, 2007 | Permalink | Newsletter
June 05, 2007
Rackable Shares Jump on Deal Rumors
Rackable shares are up about 8 percent in pre-market trading after strong gains yesterday, apparently due to renewed takeover rumors. RACK shares started the week at about $12 a share, and surged more than $1 early Monday before closing at $12.69. This morning's activity has ranged between $13.65 and $13.90, according to the CNBC ticker. There have been persistent rumors that Rackable may be a takeover candidate, with Dell mentioned most often as a prospective buyer. Several trading blogs mentioned leveraged buyout chatter as a driver in yesterday's gains.
TradingMarkets.com reports this morning that Rackable is among stocks with an "abnormal" call option volume, which is qualifies as "not easily explained by arbitrage operations." This level of activity is "suggests a possible takeover, extraordinarily good earnings report, or other news which may favorably affect the stock."
Rackable provides servers and storage products for high-density data center deployments, and has been noted for its DC power technology, innovative back-to-back rack design, and recent unveiling of a mobile data center.
Posted by Rich Miller June 05, 2007 | Permalink | Newsletter
May 17, 2007
FT: Rumors of Dell-Rackable Deal
Last week shares of Rackable (RACK) rose on persistent rumors that the company might be acquired by Dell (DELL), which is seeking to expand more forcefully into the data center business. The rumors were initially noted by several investment blogs and podcasts, but have burst into the mainstream financial media this week with a story in the Financial Times.
Rackable provides servers and storage products for high-density data center deployments, and has been noted for its DC power technology, innovative back-to-back rack design, and recent unveiling of a mobile data center.
But it's been tough sledding lately for Rackable, and Dell's data center push appears to be a contributing factor in the company's challenges. In early April Rackable lowered its revenue projections by about 30%, citing pricing pressure from competition with Dell and HP for major accounts. The company replaced its COO when it released its earnings on April 26. Four days later CEO Thomas Barton resigned, and was replaced by board member Mark J. Barrenechea, a veteran of CA and Oracle.
Posted by Rich Miller May 17, 2007 | Permalink | Newsletter
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