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Why Rackspace Hosting, Infoblox, and OmniVision Technologies Tumbled Today

By Dan Caplinger - Feb 11, 2014 at 8:30PM

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New Fed chair Janet Yellen sent the markets soaring on positive expectations for her tenure in leading the central bank, but some stocks didn't manage to share in her success. Find out why these stocks missed the boat Tuesday.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

On Tuesday, investors largely focused on what Federal Reserve Chief Janet Yellen said before Congressional leaders, drawing comfort from the belief that her tenure will closely resemble that of her predecessor. Yet even though the Dow and S&P 500 both climbed more than 1% today, several individual stocks took big hits, with Rackspace Hosting (RAX), Infoblox (NYSE: BLOX), and OmniVision Technologies (NASDAQ: OVTI) among the poorest performers in an otherwise upbeat session.

Rackspace fell 19% on news that co-founder and CEO Lanham Napier will leave the company to pursue other entrepreneurial opportunities. The cloud-computing service provider posted quarterly results that met or exceeded expectations, and its forward guidance for the current quarter and full 2014 year was reasonably positive as well. Yet in the long run, Napier's departure could have a much bigger impact if Rackspace can't find as capable a leader as a replacement.

Infoblox lost almost half its value Tuesday, plunging 48% after the automated-network control company cut its fiscal second-quarter sales expectations by $5 million. The company pointed to a particularly weak January, with a smaller number of large-value transactions and a big pullback in its federal-government business. Infoblox also cut its full-year guidance, reducing sales expectations by about $20 million and slashing its earnings range by between $0.14 and $0.20 per share. The news also led analysts to worry about Infoblox and its future prospects, and until the company can give more information about what happened, shareholders are taking cover first and will ask questions later.

OmniVision Technologies dropped 8% after rumors surfaced that Apple (AAPL 0.55%) could pick rival Sony (SONY -0.46%) to provide both of the image sensors for the iPhone 6's cameras. Sony has benefited from a huge drop in the value of the yen in the past year, and Apple might well be looking to capitalize on a potential cost-cutting opportunity by boosting the volume of business it does with the Japanese giant. With camera quality playing an important role in distinguishing Apple products from its competitors, the possible vote of no confidence could be a big problem for OmniVision going forward if the rumor proves to be true.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$141.12 (0.55%) $0.77
Sony Corporation Stock Quote
Sony Corporation
SONY
$88.62 (-0.46%) $0.41
Rackspace Hosting, Inc. Stock Quote
Rackspace Hosting, Inc.
RAX

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