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TheStreet Open House

Rackspace Drops on Profit Miss

SAN ANTONIO ( TheStreet) -- Shares of Rackspace Hosting (RAX) fell in late trades after the cloud specialist came up short on its bottom line in its latest quarterly results.

The AT&T (T) and Savvis rival brought in sales of $301 million, an increase of 31% on the same period last year, and just above Wall Street's estimate of $300.53 million. Rackspace, however, said that currency exchange rates negatively impacted first-quarter revenue by $2 million compared to year-ago period.

However, Rackspace, which does not break out non-GAAP EPS, said it earned 17 cents a share on net income of $23.2 million, up from 11 cents a share and $13.8 million in the prior year's quarter. Analysts surveyed by Thomson Reuters were looking for earnings of 18 cents a share.

The company's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margin fell on a sequential basis to 33.4% in the latest quarter from 36.1% in the December-ended period.

The stock was last quoted at $50.25, down more than 13%, on volume of nearly 550,000, according to Nasdaq.com.

The managed hosting company's cash flow from operations was $70 million. Capital expenditures were $82 million, including $53 million spent on customer gear and $9 million for data center build outs.

"While we've made a lot of progress so far in 2012, we have much more to do," explained Lanham Napier, the Rackspace CEO, in a statement released after market close. "We are executing through a very important platform shift to our next generation cloud, and we need to make this experience incredible for our customers."

Rackspace's total server count increased to 82,438, up from 79,805 in the prior quarter. Total customers climbed to 180,866, up from 172,510 at the end of the fourth quarter.

-- Written by James Rogers in New York.

>To follow the writer on Twitter, go to http://twitter.com/jamesjrogers.

>To submit a news tip, send an email to: tips@thestreet.com.

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