How Rackspace Beats the Behemoths

At a former mall in San Antonio, near escalators that used to shuttle Mervyns shoppers between floors, Rackspace Hosting (RAX) Chairman Graham Weston explains a phrase his 3,500 employees have practically tattooed to their brains: "fanatical support." That's how Weston sees Rackspace beating larger, better-known competitors such as Amazon.com (AMZN) in the business of hosting others' websites and applications on servers around the world.

The 12-year-old company had a decade of near-death experiences, including a disastrous initial public offering during the 2008 financial crisis. (Its stock fell almost 20 percent on the first day of trading.) Since 2007, Rackspace's sales have grown by an average of 30 percent every year, and analysts expect net income to climb 49 percent this year, to almost $70 million. Wall Street has caught on: Rackspace shares, up almost tenfold since early 2009, are trading near an all-time high of $46 per share, valuing the company at more than $5.6 billion. Customers include 40 percent of the top U.S. companies by revenues.