OpenStack backer Rackspace suffered worse than expected earnings in the first quarter of its financial year, sending shares in the company tumbling.
While revenues for the cloud company were up 20.2 per cent to $362 million (£235.2 million) and net income grew 17.6 per cent to $27 million (£17.5 million), the results were not good enough for Wall Street. Shares fell more than 15 per cent in after-hours trading.
Analysts laid the blame for missed revenue targets on last February's price cuts centred on Rackspace's cloud and content delivery network (CDN) services. The firm has been playing catch up with Amazon Web Services and Microsoft's Azure price war.
Rackspace chief financial officer Karl Pichler admitted that the company "got off to a slow start for the year" in its earnings release. He said that while the company needed to build a lasting,[link widoczny dla zalogowanych], successful business there was also a more immediate need to restore growth.
Chief executive Lanham Napier said that Rackspace has been focused on transitioning its business to OpenStack but not as much on its much larger hosting business. Napier echoed Pichler's comments saying that the firm is in the cloud for the long haul and predictions on how this would work out quarter after quarter were tough,[link widoczny dla zalogowanych].
"It looks to us like OpenStack has reached a tipping point in the market," Napier said,[link widoczny dla zalogowanych]. "Clearly OpenStack has reached a level of acceptance that is appealing to enterprise customers."
Jason Luce,[link widoczny dla zalogowanych], Rackspace's finance vice president said that he expected second quarter sales to be in the range of $369 million (£239.7 million) to $375 million (£243,[link widoczny dla zalogowanych].6 million). He also said that Rackspace would continue to engage Amazon and Microsoft in a price war.
"Don't be surprised if we are continually lowering prices on certain products," he said. "We are a cost-plus shop."

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