Rackspace Plunges: What Wall Street's Thinking

Updated from 12:31 p.m. to include thoughts from FBN analyst.

NEW YORK (TheStreet) -- Rackspace (RAX) shares plunged in early Tuesday trading, falling 18.1% to $33.03 after the cloud computing company posted exceptionally weak fourth-quarter results and announced the departure of CEO Lanham Napier.

For the fourth quarter, San Antonio-based Rackspace earned 14 cents a share on $408 million in revenue, up 16% year over year. Analysts surveyed by Thomson Reuters were looking for 14 cents a share on sales of $404 million.

For the quarter, Rackspace's total server count increased to 103,886, up 2% sequentially.

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Despite the in-line report, Rackspace announced that CEO and board member Napier had retired, as he looks to move into other investment opportunities. Co-founder and executive chairman Graham Weston will become 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.

Weston noted Rackspace would start to focus on the hybrid cloud, as the company attempts to differentiate itself from its competitors, including Amazon (AMZN), Google (GOOG), Microsoft (MSFT)and others, as the environment becomes more competitive on pricing. "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," Weston said in a statement.

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