[Bioclusters] Any experiences with these guys? Seems like they might have something

[Scott Kurasad]

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Has anyone heard of these guys???
 
I have never heard of this company Rackable Systems until I read an article that was just sent to me (I cut and pasted it below).  

After reviewing their website (www.rackable.com) it appears they offer 1/2depth server’s custom built to order servers for large scale deployments.  They claim to have 2x density vs. typical full depth chassis’ offered by Dell, IBM, HP, etc… (176 CPU’s in a Rack!!), that’s comparable density to Blades less the issues like heat, power consumption, etc…

Anyone have experience with them?

Here is the article that was sent to me, it was published 10/29/03 in “Tier 1 Research”

“Rackable Systems...a better Linux play than RedHat”

Rackable Systems, a privately held Linux-based rack mount server vendor, took time to bring Tier 1 Research up to speed on its extremely strong third quarter and momentum. Having been in the trenches slugging it out against Dell [DELL] and HP [HPQ] for a few years now, Rackable Systems has become the largest of the rackmount server contenders and is now gunning for the leaders. Our phrasing of the situation this way may sound far fetched, but having booked $25mn in new sales for 3Q03 with a similarly strong 4Q03 expected, eclipsing $100mn in sales for 2004 is now well within the company's line of sight. This is not from the company pumping out single server sales to millions, but instead the company saw an average deal size in 3Q03 of $250k. Even more important, the company is achieving this growth at profit levels higher than the leaders. To keep the success engine humming, Rackable Systems' growth plans call for completing the salesforce expansion in the U.S. in 2003 and th
 en
 turning to international markets in 2004. Should the success continue through 2004, we could see the company considering an IPO near the beginning of 2005.

Whether the company goes public or not, a more interesting story to attract investors to Rackable Systems is its relationship to the adoption of Linux. Considering that RedHat [RHAT] has amassed a market cap of $2.6bn on annualized revenue of $110mn all without actually owning any of its own intellectual property, Rackable Systems is riding a similar growth trend and has a very strong stable of IP related to its server designs. Since talk of intellectual property is only relevant when validated in the courts, Rackable Systems was pleased to share with us that it just successfully defended its IP in a lawsuit it filed against Kingstar. The case resolved with Kingstar admitting to the validity of Rackable Systems’ patents following which Rackable Systems is underway with another patent infringement suit against an unnamed competitor. Expecting the same outcome in this case, we are extremely intrigued with the potential for growth that mirrors or exceeds the growth of Linux. 

The successes of the business to-date are numerous with many details shared suggesting there is much more ahead for the company. Topping the list is the profitability of Rackable Systems compared to its larger competitors. Wall Street analysts following Dell show the company having gross margins for its enterprise server line of 22.1%. Rackable disclosed to us that its gross margins are generally in the 22-25% range. This will be an area worth more commentary as Rackable continues its growth and competition against Dell, but management strongly expressed the belief in being able to maintain its profit margins and still compete effectively with Mr. Dell. Accordingly, at the high end of the competitive landscape, Rackable is performing well, but the company also pointed us to consider its success with a 55 person workforce relative to the competition. The nearest competitor to our knowledge is privately held RackSaver, which we believe has roughly 2x the headcount with slighly 
 lower
 revenues according to our sources. Stated simply, Rackable Systems' secret sauce is apparently working.
Another key area of success for Rackable has been its work with partners. One example is its work with Oracle [ORCL] - Rackable has developed substantial expertise in Oracle Real Application Cluster (RAC) deployments and Oracle itself has apparently become a Rackable Systems customer. As for partnerships on the technology front, AMD [AMD] has been growing in importance to Rackable since the chip vendor's new 64-bit Opteron solution has been introduced. Rackable Systems says its has shipped over 200 systems with AMD’s 64-bit Opteron to-date. The company indicated that its Linux support capabilities and expertise are leading to new business wins and that one of its new customers - Cisco - indicated that Rackable's Linux expertise was superior to that of its other technology suppliers. While the company couldn’t share names of other certain major deal wins, it was mentioned that substantial deals were won in the oil & gas sector as well as the entertainment sector.


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<DIV><SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold">Has anyone heard of these guys???</SPAN></SPAN></DIV>
<DIV><SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold"></SPAN></SPAN>&nbsp;</DIV>
<DIV><SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold"></SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold"><SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA">I have never heard of this company Rackable Systems&nbsp;until I read an article that was just sent to me (I cut and pasted it
 below).<SPAN style="mso-spacerun: yes">&nbsp; </SPAN></SPAN></SPAN></DIV>
<P><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold">After reviewing their website (<A href="http://www.rackable.com/"><SPAN style="COLOR: windowtext">www.rackable.com</SPAN></A>) it appears they offer 1/2depth server’s custom built to order servers for large scale deployments.<SPAN style="mso-spacerun: yes">&nbsp; </SPAN>They claim to have 2x density vs. typical full depth chassis’ offered by Dell, IBM, HP, etc… (176 CPU’s in a Rack!!), that’s comparable density to Blades less the issues like heat, power consumption, etc…<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p></SPAN></P>
<P><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold">Anyone have experience with them?<o:p></o:p></SPAN></P>
<P><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-bidi-font-weight: bold">Here is the article that was sent to me, it was published 10/29/03 in “Tier 1 Research”</SPAN><B style="mso-bidi-font-weight: normal"><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'"><o:p></o:p></SPAN></B></P>
<P><B style="mso-bidi-font-weight: normal"><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'">“Rackable Systems...a better Linux play than RedHat”</SPAN></B><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'"><o:p></o:p></SPAN></P>
<P><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'">Rackable Systems, a privately held Linux-based rack mount server vendor, took time to bring Tier 1 Research up to speed on its extremely strong third quarter and momentum. Having been in the trenches slugging it out against Dell [DELL] and HP [HPQ] for a few years now, Rackable Systems has become the largest of the rackmount server contenders and is now gunning for the leaders. Our phrasing of the situation this way may sound far fetched, but having booked $25mn in new sales for 3Q03 with a similarly strong 4Q03 expected, eclipsing $100mn in sales for 2004 is now well within the company's line of sight. This is not from the company pumping out single server sales to millions, but instead the company saw an average deal size in 3Q03 of $250k. Even more important, the company is achieving this growth at profit levels higher than the leader
 s. To
 keep the success engine humming, Rackable Systems' growth plans call for completing the salesforce expansion in the U.S. in 2003 and then turning to international markets in 2004. Should the success continue through 2004, we could see the company considering an IPO near the beginning of 2005.<o:p></o:p></SPAN></P>
<P><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'">Whether the company goes public or not, a more interesting story to attract investors to Rackable Systems is its relationship to the adoption of Linux. Considering that RedHat [RHAT] has amassed a market cap of $2.6bn on annualized revenue of $110mn all without actually owning any of its own intellectual property, Rackable Systems is riding a similar growth trend and has a very strong stable of IP related to its server designs. Since talk of intellectual property is only relevant when validated in the courts, Rackable Systems was pleased to share with us that it just successfully defended its IP in a lawsuit it filed against Kingstar. The case resolved with Kingstar admitting to the validity of Rackable Systems’ patents following which Rackable Systems is underway with another patent infringement suit against an unnamed competitor. Expec
 ting the
 same outcome in this case, we are extremely intrigued with the potential for growth that mirrors or exceeds the growth of Linux. <o:p></o:p></SPAN></P>
<P><SPAN style="FONT-SIZE: 10pt; COLOR: windowtext; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'">The successes of the business to-date are numerous with many details shared suggesting there is much more ahead for the company. Topping the list is the profitability of Rackable Systems compared to its larger competitors. Wall Street analysts following Dell show the company having gross margins for its enterprise server line of 22.1%. Rackable disclosed to us that its gross margins are generally in the 22-25% range. This will be an area worth more commentary as Rackable continues its growth and competition against Dell, but management strongly expressed the belief in being able to maintain its profit margins and still compete effectively with Mr. Dell. Accordingly, at the high end of the competitive landscape, Rackable is performing well, but the company also pointed us to consider its success with a 55 person workforce relative to the
 competition. The nearest competitor to our knowledge is privately held RackSaver, which we believe has roughly 2x the headcount with slighly lower revenues according to our sources. Stated simply, Rackable Systems' secret sauce is apparently working.<o:p></o:p></SPAN></P>
<DIV><SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Arial; mso-bidi-font-size: 12.0pt; mso-bidi-font-family: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA">Another key area of success for Rackable has been its work with partners. One example is its work with Oracle [ORCL] - Rackable has developed substantial expertise in Oracle Real Application Cluster (RAC) deployments and Oracle itself has apparently become a Rackable Systems customer. As for partnerships on the technology front, AMD [AMD] has been growing in importance to Rackable since the chip vendor's new 64-bit Opteron solution has been introduced. Rackable Systems says its has shipped over 200 systems with AMD’s 64-bit Opteron to-date. The company indicated that its Linux support capabilities and expertise are leading to new business wins and that one of its new customers - Cisco - indicated that Rackable's Linux expertise was
 superior to that of its other technology suppliers. While the company couldn’t share names of other certain major deal wins, it was mentioned that substantial deals were won in the oil &amp; gas sector as well as the entertainment sector.</SPAN></SPAN></DIV><p><hr SIZE=1>
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