Here’s Why Rackspace Shares Are Crashing 14%

Rackspace Hosting Inc. (NYSE:RAX) reported first-quarter profits today after the bell that missed analysts’ expectations, sending share plummeting nearly 14 percent in after-hours trading.

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Net income rose to $23.2 million, or 17 cents per share, for the quarter ended in March, from $13.8 million, or 10 cents a share, in the year-ago period. Analysts had expected EPS, excluding items, of 18 cents, according to Thomson Reuters I/B/E/S.

Rackspace posted revenue of $301.4 million, up 6.4 percent from the previous quarter and 31 percent from the year-ago period, beating Wall Street’s expectations for $300.5 million.

Adjusted EBITDA for the quarter was $101 million, down 1.4 percent from the fourth quarter, but up 33 percent from the year-earlier quarter.

“While we’ve made a lot of progress so far in 2012, we have much more to do. 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. Massive technology disruptions like this create once in a lifetime opportunities for companies to seize the moment, take the initiative, and lead the revolution. Our goal is to lead the revolution,” CEO Lanham Napier said in a statement.

Rackspace shares were down 13.75 percent in after-hours trading as of 4:39 p.m. EDT.

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