May 8, 2013 / 9:00 PM / 7 years ago

UPDATE 1-Rackspace results miss estimates after price cuts

* First-quarter revenue $362 mln vs est $367.2 mln

* Earnings per share $0.19 vs est $0.20

* Shares fall 14 percent in after-market trading

May 8 (Reuters) - Rackspace Hosting Inc, which leases online storage space to companies, reported a lower-than-expected quarterly results after it cut prices of some of its products in February.

The company’s shares fell 14 percent to $44.84 in after-hours trading.

Rackspace cut prices of its cloud bandwidth and content delivery network (CDN) by a third in late February. ()

“The primary miss came from underestimating the impact of the CDN and cloud storage price cuts the company implemented in February,” Stephens Inc analyst Barry McCarver told Reuters.

He said the full impact of the price cuts will be seen in the current quarter.

Web hosting companies such as Rackspace and competitors Equinix Inc and Internap Network Services Corp own or lease space on a server, typically housed in data centers, warehouses lined wall-to-wall with powerful storage servers.

Many companies have migrated to hosting their applications in “the cloud” — using the Internet to provide software, computing power and data storage — as a cheaper alternative to in-house resources in a slow-growth economy.

Rackspace also said its first-quarter revenue was reduced by currency exchange rates.

Net income rose to $27 million, or 19 cents per share, in the first quarter, from $23.2 million, or 17 cents per share, a year earlier.

Revenue rose 20 percent to $362 million.

Analysts on average had expected earnings of 20 cents per share on revenue of $367.2 million, according to Thomson Reuters I/B/E/S.

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