Rackable Systems hits new low on revised Q1 outlook
Computer server and storage provider Rackable Systems Inc. (Nasdaq: RACK) surprised analysts when it said late Wednesday that it expects to report a net loss for the first quarter ended March 31.
This morning, the Milipitas, Calif.-based company’s stock was down $2.48, or 14.7%, to a new 52-week-low of $14.43 on unusually heavy volume of 8.7 million shares. Eight analysts polled by Thomson First Call were expecting Rackable Systems to record a profit of $0.05 per share for the quarter. Rackable Systems did say that revenue should remain in the target of previous projections of $70 million to $75 million; analysts are projecting revenue of $73.8 million.
In announcing the revised outlook, Rackable Systems cited intense competition in its largest accounts as the primary factor behind the anticipated first quarter loss. Competitors include technology heavyweights such as Hewlett-Packard Co. (NYSE: HPQ) , Dell Inc. (Nasdaq: DELL) , and IBM Corp. (NYSE: IBM) .
Rackable Systems said it also expects operating expenses to be higher than previously expected due to an order cancellation, severance charges related to an internal reorganization, and additional charges relating to sales and use tax exposures from past sales to various customers.
Tom Barton, Rackable Systems’ CEO, says his firm plans to be more competitive in the future through “product and service innovation and operational efficiency improvements.”
For 2006, Rackable Systems reported net income of $11.5 million on revenue of $360.4 million.
Prior to today, Rackable Systems’ 52-week-low of 15.96 was reached on March 5. Its 52-week-high of 55.75 was reached one year ago today.
