Rackspace Forecasts 3Q Revenue Above Views


Rackspace Hosting Inc (NYSE:RAX) reported better-than-expected quarterly revenue, helped by higher demand for its cloud management services, and it forecast current-quarter revenue above analysts' estimates.

The company, which put itself on the block earlier this year, expects current-quarter revenue of $454-$461 million, higher than the average analyst estimate of $454.2 million.

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In the second quarter ended June 30, the company added "thousands" of customers, recorded solid growth from existing customers and revenue per server was at an all-time high, Chief Executive Graham Weston said in a statement.

Rackspace leases online storage space to companies and provides its clients management and support services for their cloud-based operations.

The company is facing tough price competition from Amazon.com Inc, Google Inc and Microsoft Corp for cloud services that includes online storage, processing power and database services.

The company expects third-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 31-33 percent. It reported adjusted EBITDA margin of 32.1 percent for the second quarter.

Rackspace's revenue rose 17 percent to $441.1 million in the quarter from a year earlier.

Net income remained flat at $22.5 million, or 16 cents per share.

Analysts had expected a profit of 16 cents per share on revenue of $436.9 million.

The company's shares closed at $31.31 on the New York Stock Exchange. The stock had lost a fifth of its value this year to Monday's close.

(Reporting by Soham Chatterjee in Bangalore; Editing by Maju Samuel)