Rackspace Profit Falls 30%, Names Graham Weston CEO; Stock Tumbles - Update

(RTTNews) - Cloud computing company Rackspace Hosting Inc. (RAX) Monday reported a 30 percent decline in fourth-quarter profit, hurt by expenses even as revenues climbed 16 percent from last year. While quarterly earnings matched Wall Street estimates, revenues topped expectations.

Rackspace also said that Lanham Napier has retired from the company as chief executive officer and as a member of the board. Graham Weston, Rackspace's co-founder and executive chairman, has been appointed CEO, a post he earlier held from July 1999 to August 2006.

Napier will remain a consultant to Rackspace for the next several months to ensure a smooth transition even as the company has initiated a search process to identify a long-term successor CEO.

The San Antonio, Texas-based company posted quarterly net income of $21 million or $0.14 per share, compared with $30 million or $0.21 per share last year.

On average, 22 analysts polled by Thomson Reuters expected earnings of $0.14 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter climbed to $408 million from $353 million in the prior period, and topped analysts' expectations of $404.6 million.

Results were impacted by expenses that escalated to $381 million from $303 million a year ago. Operating margin slid to 9.4 percent from 14 percent last year.

Total server count increased to 103,886, up from 90,524 servers a year earlier. Average monthly revenue per server fell to $1,298 from $1,310 in the prior year.

Rackspace stock closed Monday at $40.36, up $0.85 or 2.15%, on a volume of 6.6 million shares. In after hours, the stock dropped $3.66 or 9.07% at $36.70. In the last year, the stock has traded in the range of $32.62 - $75.37.