Rackspace 2nd-Quarter Profit Rose 43% As Revenue Climbs

Date : 08/07/2012 @ 4:57PM
Source : Dow Jones News
Stock : Microsoft Corp. (MM) (MSFT)
Quote : 68.27  0.44 (0.65%) @ 8:00PM

Rackspace 2nd-Quarter Profit Rose 43% As Revenue Climbs

Rackspace Hosting, (delisted) (NYSE:RAX)
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   By Tess Stynes 
 

Rackspace Hosting Inc.'s (RAX) second-quarter earnings rose 43% as the data-storage provider continued to record strong revenue growth and add customers.

Shares were up 5.4% at $51.98 in recent after-hours trading as revenue topped expectations. Through Tuesday's close, the stock is up roughly 37% in the past year.

The company has posted stronger bottom-line results in recent periods as it continues to benefit from businesses' push to manage technology resources more efficiently. The company has also added software and higher levels of service to its core storage offerings, in an effort to stand out in a crowded field. Its acquisition earlier this year of SharesPoint911--a consulting firm focused on Microsoft Corp.'s (MSFT) SharePoint collaboration software--highlights that focus.

Rackpace's cloud storage business--which allows companies to rent server capacity by the hour, paying only for what they use--has seen particular growth.

Rackspace Hosting reported a profit of $25 million, or 18 cents a share, up from $17.6 million, or 13 cents a share, a year earlier. Revenue increased 29% to $319 million.

Analysts polled by Thomson Reuters most recently projected earnings of 18 cents on revenue of $318 million.

Gross margin rose to 71.8% from 70.1%.

Dedicated cloud revenue, which accounts for the bulk of the top line, climbed 21%. The smaller public cloud segment's revenue surged 69%.

Rackspace ended the period with 190,958 customers, up from 152,578 a year earlier. Installed-base growth, a measure of revenue derived only from existing customers, was 1%, up from 0.9% a year earlier.

Write to Tess Stynes at tess.stynes@dowjones.com

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