Rackspace Hosting, Inc. CEO Retires, Replaced by Chairman

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.


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  • Report this Comment On February 10, 2014, at 7:59 PM, Rouleur wrote:

    Hi Tim,

    You have been a supporter at very high valuations all the way down to half the price of what the stock was a year ago. Do you still think that this company should trade at a premium of 4-5 times its growth rate after 4-5 quarters of less than compelling growth? If it was a best buy at $80, is it a best buy now?

    Thanks so much. Your feedback would be appreciated.

  • Report this Comment On February 10, 2014, at 9:16 PM, TMFMileHigh wrote:


    Yes, I have been and I still own shares.

    I've sent a note to the PR person at Rackspace asking if we could get some time with management to talk strategy since I think we could all benefit from better understanding what's next, what type of executive the recruiters are looking for, etc.

    Hoping that happens soon, and if it does, I'll be sure to write about it.

    Thanks for writing and Foolish best,



    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

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Tim Beyers

Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at or send email to For more insights, follow Tim on Google+ and Twitter.

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