Rackable Systems Drops on Earnings/Revenue Miss, Again

Apr.27.07 | About: Rackable Systems (RACK)

Rackable Systems swung to a $10.2 million ($0.36/share) loss, from a $0.23/share profit a year ago, blaming pricing pressures on its three top accounts and surging expenses. Revenue dropped 15% to $72 million. The numbers missed analyst forecasts of a $0.05 loss on $75 million, sending shares down 3.3% to $12.17 in after-hours trading. Its Q2 guidance of $75-85 million also fell short of Street estimates of $94.4 million. In its press release, the company said it has foretold of coming weakness in an April 5 conference call, but said it was, "encouraged by the progress Rackable Systems 27 04 2007 Chartwe've made over the past thirty days in assessing our long-term business model," including a new-plan for its largest accounts, a strategy to diversify revenue, and a focus-change to high-margin products. "We believe we have the right team and strategy in place to stabilize gross margin attainment and improve long-term profitability." Shares have dropped from $50+ to a current $12.17 over the last 12 months.

Sources: Press release, AP, MarketWatch
Commentary: Rackable Systems: Tough To Be A Midget In The Land Of GiantsRackable Systems: A One Hit Wonder?Three Stocks That Missed the Mark [Motley Fool]
Stocks/ETFs to watch: Rackable Systems Inc. (RACK). Competitors: Dell Inc. (NASDAQ:DELL), Hewlett-Packard Co. (NYSE:HPQ), International Business Machines Corp. (NYSE:IBM). ETFs: SPDR Technology (NYSEARCA:XLK), iShares Goldman Sachs Technology Index Fund (NYSEARCA:IGM), iShares Dow Jones US Technology Index (NYSEARCA:IYW)

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