'Unprecedented' Rackable makes sense - CEO
One of the biggest knocks against Rackable has been its dependence on those three, large customers. Any level of consistency in Rackable's financial results remains at the mercy of its internet base's appetites. A delayed purchase order, for example, can dampen a decent quarter and send Rackable's shares into shock.
"It's a high quality problem to have," Barton said. "We certainly do have some amount of customer concentration. And we have grown along with their growth in x86 server deployments. But would we have not taken business from these guys? No. We'll take every piece of business we can."
The start-up must prove that it can maintain strong growth - no easy feat in the low-margin x86 business - by looking to new areas.
So, Rackable has moved to expand its customer base, picking up large clients in the oil and gas and bio-tech fields. Such customers desire similar high performance computing type servers as the internet crowd.
Rackable has also placed an enormous emphasis on storage, as evidenced by its $40m purchase of storage software and appliance maker Terrascale. You'll now find the Terrascale kit sold under the RapidScale brand.
That type of investment shows that Rackable is willing to acquire help in a way that, say, Dell isn't.
[Hear Barton size up the competition.]
"In 2007, we certainly want to maximize the sales of our higher gross margin RapidScale line," Barton said. "That is very important to us. It's much higher margin than our traditional x86 server business. We believe that technology is world class in what it can do."
Also on tap for growth potential is an international push with Rackable targeting EMEA and China.
Oddly, Rackable has decided to go after the "virtualized desktop market" as well.
Call it what you will, but this is the same thin client push that has been going on for years. In Rackable's version, the company will tie deskside monitors back to servers outfitted with VMware, Citrix or whatever else you can find.
"I think it is actually going to happen," Barton said. "I think that market is a real market."
Best of luck.
[Barton explains Rackable's big pitch.]
On the rack
Rackable investors clearly wonder how far the vendor can creep out of its niche. The company's stock moves in volatile spits and spurts with just small slivers of information driving the gyrations. The worries over Rackable's growth rates are clear and so are the fears that the company won't be flying under the radar of the Tier Ones for much longer.
On earnings calls, Barton has promised to disclose more and more large customers outside of the internet sector. Such revelations are key to establishing Rackable as a consistent, long-term force in the server market.
It's anyone's guess as to whether or not Barton can make Rackable live up to its promise. He does, however, appear to be the right man for the job, if only on a superficial level.
Barton and Rackable share a no frills type of attitude. Straight talk, simple servers. Last time we checked, that combination worked pretty well for a guy named Dell.
Been there, done that hardly seems like the best reason to get excited about a company, but then we thought venture funding a simple rack server vendor seemed silly too. ®