Rackspace Hosting Reports Higher Profit

Cloud-computing company Rackspace Hosting Inc. reported higher profit and revenue in the third quarter.

Shares, down 42% this year, rose 1.5% to $27.50 in late trading as results topped Wall Street projections.

Rackspace, which last year called off a possible sale saying it failed to attract a high enough offer, has struggled to increase business since it changed its business model to focus on the so-called managed cloud market, selling bundled computing and support. Rackspace said product and marketing hiccups were exacerbated by high staff turnover tied to the last year's strategic evaluation.

The San Antonio company is one of the pioneers in cloud-computing services, which free companies from having to build, maintain and staff data centers. It has reached key partnerships with Amazon.com Inc., Microsoft Corp. and Intel Corp.

Overall, Rackspace reported profit of $36.5 million, or 26 cents a share, compared with $25.7 million, or 18 cents a share, a year earlier.

Revenue rose 11% to $508.9 million.

Analysts surveyed by Thomson Reuters projected 20 cents a share on $503.1 million in revenue.

Gross margin narrowed to 66.4% from 68.9% a year earlier, while costs rose 8% to $452.4 million.

The number of servers deployed at the end of the quarter rose 7% to 118,654.

Rackspace is trying to expand operations in continental Europe, the Asia-Pacific region and Latin America. For the first six months of the year, the company said, about 30% of its revenue came from international customers.

For the current quarter, Rackspace projects revenue to increase 2% to 3% from the third quarter, adjusted for currency fluctuations, topping analysts' projected $517.6 million.

Write to Maria Armental at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 09, 2015 17:05 ET (22:05 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.