This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Digital Realty Trust Ousts CEO As It Seeks New Scale

Stocks in this article: DLR DFT RAX

NEW YORK (The Deal) -- Shares of data center REIT Digital Realty Trust Inc. (DLR) dropped Tuesday after the company announced a management shake-up.

The board said after the close on Monday that it named CFO William Stein to temporarily replace CEO Michael Foust, while it seeks a new top executive who can lead the company to "the next level and scale of operational sophistication."

Shares of the San Francisco REIT fell as low as $50.10 on Tuesday morning, a 5% decline. By the afternoon, the stock had recovered some losses, and was down 1.26 cents, or 2.4%, to $51.51. It closed at $51.91. By midday Wednesday, the stock had hit a high of $52.95.

"We find the announcement surprising as it is sudden and effective immediately-and at the same time, not surprising as the company has struggled with weak stock performance for nearly two years," Jonathan Schildkraut of Evercore Partners Inc. wrote in a report.

Digital Realty is not the only data center operator with management in flux.

Large data center REIT DuPont Fabros Technology (DFT) is seeking a replacement for co-founder and CEO Hossein Fateh.

Rackspace Hosting (RAX), which is not a REIT, announced unexpectedly in February that CEO Lanham Napier would retire. Chairman and founder Graham Weston is interim CEO while the company seeks a long-term top executive.

Following Tuesday's losses, Digital Realty's market cap is about $6.6 billion. The company has close to $5 billion in long-term debt. UBS analyst Gabriel Hilmoe noted that Digital Realty has been down 21% over the past 12 months, while the MSCI Inc. index of U.S. REITs, which trades as RMZ, has been essentially flat.

Digital Realty stock "has languished in the midst of declining data center fundamentals, guidance reductions, accounting mishaps and questionable execution," he added.

The board did not say whether it would consider broader strategic changes alongside the executive search.

"Could this result in some sort of M&A activity?" Hilmoe asked. "Maybe, but who has the wherewithal or cash to step in and potentially takeout a $6.6B data center REIT?"

Peer Equinix Inc., of Redwood City, Calif., has business relationships with Digital Realty and also has plans to convert to a REIT. However, Hilmoe suggested that Equinix shareholders might balk at a deal with Digital Realty because of Digital's problems.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs