Rackspace Hosting (RAX) Tumbles After Earnings, CEO Departure

NEW YORK (TheStreet) -- Cloud computing specialist Rackspace Hosting  (RAX) is tumbling in the extended session after posting fourth-quarter results and announcing the departure of CEO Lanham Napier.

In post-market trading, shares have taken off 8.8% to $36.82, after gaining 2.2% over Monday.

In the three months to December, the San Antonio-based company earned 14 cents a share on revenue 16% higher year-over-year to $408 million. Earnings came in as analysts surveyed by Thomson Reuters had expected, while sales beat by nearly $4 million.

Rackspace's total server count increased to 103,886, up 2% on a sequential basis.

Net income of $20.8 million took a hit, down 30% from the year-ago quarter. Adjusted EBITDA was negatively impacted by non-cash charges relating to data center operating leases.

Along with the earnings release, Rackspace announced CEO and board member Napier had retired. Co-founder and executive chairman Graham Weston will assume the position of CEO.

"My decision to step down as CEO was a difficult one, but it's the right choice for me and for the company. With the board and management team aligned around our 2014 strategy and financial plan, I believe now is a natural transition point to select a new leader for the next exciting phase of Rackspace's growth," said Napier in a statement.

To the year ahead, newly-appointed CEO Weston noted a focus on differentiation.

"In 2014, we will take the next step to carve out our differentiated position and help the next adoption wave of customers reach a hybrid cloud world. We will continue to invest in our portfolio of services and reinforce our differentiation in the market. We will win as we always have one delighted customer at a time," said Weston.

Must Read: Bill Gates Wants to See Commitment to the Cloud

TheStreet Ratings team rates RACKSPACE HOSTING INC as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate RACKSPACE HOSTING INC (RAX) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."

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