Tuesday, October 19, 2010

Rackspace Surpasses 2 Million Business E-Mail Accounts

By David Gross

Rackspace (RAX) recently announced that it has surpassed 2 million hosted e-mail accounts, up from 600,000 three years ago when it acquired Webmail.us. The company's hosted e-mail service centers on its proprietary e-mail, as well as Microsoft Exchange. Additionally, it offers a hybrid service that lets users of either system share calendaring and collaboration tools.

Since acquiring Webmail, Rackspace has kept the acquired company's Blacksburg, Virginia offices. Blacksburg is home to Virginia Tech, and is four hours from the expensive Northern Virginia labor market, a factor which helps Rackspace avoid some of the high labor costs it would see if it had more people near DC. This is also important for a company that has close to 3,000 employees, is in a very labor-intensive business, with just $250,000 of revenue per employee, and is based in low cost San Antonio, not Santa Clara, Secaucus, or Ashburn.

At the time of the merger, Webmail (which was re-named Mailtrust after the acquisition) had 70,000 customers, or about nine e-mail boxes per company. Rackspace did not say how many companies were represented by the 2 million accounts it has now, but the reference customer in its press release had over 2,000 e-mail boxes. Moreover, if it hadn't grown the number of e-mail accounts per company, it would have around 250,000 companies using its hosted e-mail service, which would be difficult to believe.

Rackspace has not announced a date for its next quarterly earnings call, and reports on a standard calendar quarter. However, it typically waits until the end of earnings season, so the call probably will not take place for another few weeks.

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