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Rackspace Down 7% After Q3 Report

Rackspace Down 7% After Q3 Report

Rackspace (NYSE: RAX) was down more than seven percent in after hours trading, after announcing its third quarter results.

The IT hosting company reported a Q3 EPS of $0.11, which may not compare to the Street estimate of $0.16.

Revenue came in at $388.6 million, which may not compare to the Street estimate of $387.47 million.

Sales were up 16 percent year-over-year.

In addition to Monday's declines, Rackspace has fallen more than 37 percent year-to-date.

Last summer, Rackspace encountered an "internal network issue" that caused problems for a number of its customers. One of them was Olark, a Y-Combinator company that provides live chat and real-time monitoring for websites.

Olark co-founder and CEO Congleton told Benzinga that he was pleased with the job that Rackspace had been doing. He said that the firm made it "easier for big companies to mitigate risk by spreading their cloud resources across multiple providers."

"At the same time, Rackspace and other vendors are quite a bit behind Amazon (NASDAQ: AMZN) in terms of additional features of their platform," Congleton added. "It's incredibly hard, from a technical standpoint, if you're relying on all the services that Amazon provides you, and you need to figure out how to split your stuff across vendors and mitigate different kinds of catastrophic failure, so it's not an easy option."

Investors did not seem to be too interested in its deal to deliver hybrid cloud hosting for Ektron.

This may have been due to the company's struggle to maintain OpenStack users. Customers are reportedly abandoning the platform for competitors like Hewlett-Packard (NYSE: HPQ) and IBM (NYSE: IBM), both of which have spent billions to become leaders in cloud computing.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ


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Posted-In: Amazon Ben Congleton Ektron hewlett-packard Olark OpenStackEarnings News