Rackable's Fourth-Quarter Earnings Miss

Rackable Systems (RACK) reported a huge fourth quarter earnings miss yesterday , and the stock dropped dramatically after hours.

Rackable said revenue for the quarter was $105.5 - $106.1 million; that’s consistent with the company’s previous guidance of $100 - $110 million. The problem was a sharp drop in margins: the company said it will report GAAP income between a loss of two cents a share and a one-penny profit; on a non-GAAP basis, Rackable now sees profits of 17-18 cents. Previously, the company had forecast profits of 10-12 on a GAAP basis and 25-27 cents on a non-GAAP basis.

Rackable cited several reasons for the miss:

* DDR memory pricing was higher than anticipated at the start of the quarter.
* Intense competitive conditions caused the company to price contracts more aggressively in order to maintain and expand relationships with its customer base.
* Lower-than-expected sales of the company’s RapidScale products.

The company will report final results on February 1.

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