Rackspace Hosting, Inc. CEO Retires, Replaced by Chairman

Shares slump more than 10% after hours as Q4 results fail to impress.

Feb 10, 2014 at 5:44PM

Rackspace Hosting (NYSE:RAX) CEO Lanham Napier retired suddenly this afternoon. He had led the company for a little more than seven of his 14 years with the company. Chairman and co-founder Graham Weston will step in as CEO on an interim basis.

The news came on the heels of Rackspace's fourth-quarter financial report. Revenue improved 16% to $408 million, including $4.2 million in gains resulting from currency exchange rates. Net income fell 30% while per-share earnings fell to $0.14 from $0.21 in last year's Q4. Analysts were expecting $0.14 a share on $404.56 million in revenue.

Core business metrics were also mixed. Average revenue per server improved from $1,130 per month in last year's Q4 to $1,322, yet return on capital fell to 9.6% from 16.9% and operating margin declined to 6.7% from 14.1%.

Looking ahead, Napier plans to invest in and advise other entrepreneurial companies while remaining as a consultant to Rackspace in order to ensure a smooth transition. Weston, meanwhile, will be joined by Taylor Rhodes, who is moving up to president from chief customer officer.

"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," Weston said in a press release. "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."

Rackspace shares, already down 45% over the past year, fell more than 13% in extended trading.


Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Rackspace Hosting at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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