Rackspace Technology Inc.’s shares rose about 10 percent after the San Antonio-based cloud computing company announced earnings Wednesday that beat Wall Street expectations.
“I have been totally focused on transforming Rackspace Technology into a customer-centric, cloud-first company and changing the way we perform,” CEO Amar Maletira told analysts and reporters during a conference call Wednesday afternoon.
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Maletira, who took over as CEO in September, said the company had “achieved significant milestones” including the new business model and new leadership.
“We are ready to drive these changes across the business and bring our strategy to life,” he said. “We are very focused on stabilizing this business over the long term, even if that requires a short-term disruption. While the next few quarters may be choppy, our focus is on positioning the company for sustained growth through 2024.”
Financial results, while beating analysts’ forecasts, continued the company’s recent history of net losses despite steady revenue growth. Though its shares fell nearly 4 percent in Wednesday’s regular session to close at $2.64, they were up nearly 10 percent in after-hours trading after Rackspace reported results after the close.
For the three months ended December 31, Rackspace reported a net loss of $214 million on revenue of $787 million. This compares to a net loss of $83 million on sales of $777 million in the same period a year ago.
The results include impairments of $129 million due to a decline in market cap following December’s ransomware attack and $75 million related to the company’s upcoming move from its longtime headquarters in Windcrest to North San Antonio later in the year this year.
For the full year, Rackspace said its net loss widened to $805 million from $218 million in 2021. Revenue increased to $3.12 billion, up from $3.01 billion a year earlier.
Rackspace stock fell nearly 80 percent in 2022 due to ongoing losses, the company’s restructuring, and the ransomware attack.
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On Wednesday, it was forecasting that revenue would be between $754 million and $762 million for the first quarter of 2023.
New hires, relocation plans
Founded in 1998, Rackspace has long struggled to find its place in the growing cloud computing market. New York-based Apollo Global Management took the company private in a $4.3 million deal in 2014, before relisting it publicly in 2020. His performance has stalled.
That was a factor in the reorganization introduced earlier this year that split the company into entities offering public cloud and private cloud services. Public clouds are subscription services shared with customers over the Internet. A private cloud is a service controlled by a company or organization.
In July, Rackspace began populating its restructuring plan list by hiring Dharmendra Sinha as president of its public cloud business unit. In September, the company hired Maletira – its former president and chief financial officer – to succeed Kevin Jones as CEO. Then, in November, it appointed Bobby Molu to replace Maletira as CFO.
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There were other big changes too.
In October, the company announced it was putting its Windcrest headquarters up for sale and downsizing to offices near Stone Oak. Then it was hit by the December 2nd ransomware attack.
With its reputation on the line, Rackspace hired Brian Lillie as president of its new private cloud business unit last month.
Maletira said the company now has “strong leadership” for its private and public cloud businesses.
“Although we have only been in a new operating model for a few months, I am encouraged by the early signs of progress, although it will take some time for that progress to be fully reflected in the financial results,” he said. “I am firmly convinced that we are on the right track.”
Looking ahead, Maletira identified a challenging “macro environment” and longer sales cycles.
“The recent economic slowdown has also prompted many organizations to take a more conscious approach when evaluating whether a workflow should operate in the public or private cloud to optimize performance and costs,” he said.
Still, Rackspace is “one of the biggest players in the private cloud space,” he said.
He said the company is well positioned to succeed in the private cloud market, having global experience and partnerships with Dell, the Round Rock-based tech giant, and VMware, a cloud computing company in California. dispose