Rackable Systems (RACK) just dropped the ball, again (again, not an echo). Revenues are still expected to be $70 to $75 million, but non-GAAP margin will be 30% LESS than previously communicated. It blames competition intensity in the largest accounts. Simultaneously, its expenses are higher due to the casncellation of an order from one customer and due to one-time charges. Now the company plans to post a LOSS on both a GAAP and non-GAAP basis instead of $0.05 EPS; revenues were expected to be $73.8 million according to street estimates.
RACK closed up 1.08% at $16.88, but shares are now down 7.5% at $15.70. The 52-week range is $15.96 to $56.00. This marks the third such warning in the last year, so this one has rapidly gone from a "HI-BETA" and "HI-FLYER" to a dud faster than mellowing growth stocks. We were going to say "RACK is getting Racked," but we’ve already said it.
Jon C. Ogg
April 4, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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