Super Micro Computer, Inc.: Serving up shareholder value
Super Micro Computer, Inc. (Nasdaq: SMCI)
San Jose, California
http://www.supermicro.com
52-week low / high: $8.17 / $11.85
Shares Outstanding: 41.84 million
Market Capitalization: $404.63 million
Servers are the backbone of the Internet. These workhorse computers serve up graphics, text and video to Web surfers around the world. San Jose, Calif.-based Super Micro Computer, Inc. (Nasdaq: SMCI) wants to make servers serve you faster.
The 14-year-old company makes high-performance, mission-critical motherboards and servers for its customers, who represent industries that include scientific research, enterprise IT and communications.
The company has been rapidly introducing new products. On Dec. 4, Super Micro released a smaller, low-noise server aimed at small and home-based offices. During November alone, the firm announced more than four new product lines and products. Its DP Xeon DDR2 Server/Workstation product line, unveiled on Nov. 13, uses low-heat technology to increase energy efficiency. On Nov. 12, Super Micro released a line of motherboards, servers and workstations using a new dual-processor system that delivers performance gains of more than 30%. The company has more than 3,500 products and sells them through more than 400 channel partners. In its first-quarter press release, the company said it has “seen a historical pattern of increased sales traction following the introduction of new products.”
The company held its initial public offering (IPO) in March. UBS and Merrill Lynch underwrote the eight-million share IPO.
During the recent first quarter fiscal year 2008, ended Sept. 30, Super Micro recorded net sales of $117.9 million, in line with the consensus analyst estimate and up 31% from $90.2 million a year earlier. The firm’s quarterly net income totaled $5.8 million, or $0.15 per share, up from $4.8 million, or $0.15 per share, during the same period of 2006. On average, Wall Street analysts projected first-quarter earnings of $0.13 per share.
Going forward, Super Micro said it expects second-quarter net sales in the range of $128 million to $135 million, compared to the consensus analyst estimate of $131 million. Analysts, on average, are calling for earnings of $0.18 per share.
Super Micro hasn’t been free of scandal. In September 2006, Super Micro pleaded guilty to shipping computer parts to Dubai, a violation of U.S. export laws. Super Micro was forced to play a $150,000 fine. The company has also been compared to Rackable Systems, Inc. (Nasdaq: RACK), a Fremont, Calif.-based provider of energy-efficient servers. In September 2006, Rackable sued Super Micro, claiming that Super Micro’s products violated two of Rackable’s patents. The companies settled litigation in May and Super Micro said the settlement had no impact on its “business activities and financials.”
During an Oct. 31 conference call, CEO Charles Liang said the company expanded its employee base and is looking to add more production resources in order to meet demand.
“We are continuing to evaluate sites in Asia to expand our manufacturing and warehousing capacity in the near term, in order to reduce most production and logistic cost,” Liang said. “All of this is within our plan to grow our technical and operation capability and capacity to build a stronger foundation for our future growth while maintaining our financial discipline and growing our [shareholders’]value.”
Note: Super Micro (Nasdaq: SMCI) is on the “Watch List” of Rising Star Stocks, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Super Micro displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Rising Star Stocks portfolio at a later date.
