Summary:

Rackspace reported cloud revenues of $31.4 million during the quarter, up approximately 17.1 percent over the previous quarter, and bringing the company’s total 2010 cloud revenue to $100.7 million. Perhaps more telling, though, is the increasing percentage of overall revenue attributed to cloud computing.

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Rackspace saw its cloud revenue hit the stratosphere during the fourth quarter of 2010, according to its financial results issued Thursday afternoon. The managed hosting and cloud provider reported “cloud revenue” of $31.4 million during the quarter, up approximately 83.4 percent year over year, bringing the company’s total 2010 cloud revenue to $100.7 million. Perhaps more telling about the future of Rackspace’s business, though, is the increasing percentage of overall revenue attributed to cloud computing.

Cloud revenue — which isn’t defined but which likely comes from Rackspace’s Cloud Servers, Cloud Files and Cloud Sites offerings —  accounted for approximately 14.6 percent of Rackspace’s total quarterly revenue of $214.7 million, up from approximately 12.3 percent of total revenue in the second quarter and 13.4 percent in the third quarter. Slowly but surely, Rackspace is relying more heavily on cloud computing to drive its bottom line. If I didn’t know better, I might think it’s a cloud provider only, as Rackspace rarely makes headlines with its nearly $680 million dollar managed hosting business.

Rackspace has been all over the news lately, especially with regard to the OpenStack cloud platform project that it leads. The pace of development and an influx of new contributors have garnered lots of attention, as has — in the past day — skepticism from some that it bought Anso Labs, the brains behind Nebula, so Rackspace could have a larger share of the OpenStack Project Management Committee. A couple of weeks ago, Verizon’s purchase of Terremark had some — including myself — noting that Rackspace might be the crown jewel if telcos were going to start consolidating hosting providers to boost their own cloud portfolios.

Perhaps everyone just sees the writing on the wall. At the current pace, it will take almost 10 years for cloud revenue to eclipse hosting revenue for Rackspace, but I don’t think it will take that long. For one, total net revenue increased only 7.5 percent quarter over quarter compared with 17.1 percent for cloud revenue. And then there’s OpenStack. Its open source foundation aside, the project presents a prime opportunity to offer services and premium versions of the software that could end up making Rackspace a lot of money — and that’s on top of the increased sales that undoubtedly will come when Rackspace replaces its current cloud platform with the supposedly superior OpenStack software. We also don’t know exactly how Rackspace will monetize the Cloudkick management and monitoring technology it acquired in December.

However big the business gets, though, no one can take away Rackspace’s crown as — as far as I know — the only company reporting a $100 million dollar cloud business derived solely from public-cloud services. If estimates are correct, Rackspace has a way to go to catch Amazon and its roughly $500 million in cloud revenues, but it’s headed in the right direction and it has the tools to make a run.

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