Rackspace IPO Will Fund New Data Centers

Rackspace intends to use part of the proceeds from its upcoming IPO to expand its data center network.

Rich Miller

April 29, 2008

2 Min Read
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Rackspace intends to use part of the proceeds from its upcoming IPO to expand its data center network. The company expects to spend at least $160 million between construction of its new headquarters and expanding its data center space.

"We are currently evaluating alternatives for a new data center in the U.S.," Rackspace said in its filing. "We may use a portion of the 1.2 million square feet in the Windsor Park Mall as a data center. We are also evaluating other alternatives. We expect to select a location for this new data center by the end of 2008."

The expansion is needed because Rackspace is running out of space in its primary hosting facility, a 144,000 square foot data center in Grapevine, just north of Dallas. The company is building out the third and final phase, which is 22,000 square feet and will come online in the fourth quarter of 2008.

Rackspace has 114,749 square feet of technical space in seven data centers in San Antonio, Texas; Grapevine, Texas; Herndon, Virginia; and London.

Rackspace has also leased 50,000 square feet of data center space in Slough, U.K., which is under construction and will be finished in July. Rackspace plans to consolidate two of its three existing UK data centers into the Slough facility.

Rackspace leases all its facilities, and notes that its current data centers were "acquired relatively inexpensively as distressed assets of third parties." An example is the Grapevine center, which was built in 200 by Qwest, which later decided to get out of the hosting business. Rackspace leased 60,000 square feet in 2004, and assumed Qwest's lease in late 2006. It currently pays $10.25 per square foot for the facility.

Rackspace realizes such deals no longer exist, noting in its S1 filing that the company "may need to pay full market rates for our new data center facilities."

Here's a look at the company's three-year growth in data center space, capacity utilization and revenue per square foot:

And here are some other quick facts from the Rackspace filing:

  • The company's data center power bill in 2007 was $7.3 million.

  • Rackspace had $24.9 million in cash as of December 31, 2007, and it has $57.3 million in debt.

  • As of year-end 2007, Rackspace managed 36,692 servers, up from 17,887 at the end of 2005.

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