Rackable Systems Gets Racked

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By Douglas A. McIntyre Published
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What happens when a high-multiple and high-beta stock that has been a high-flyer misses or pre-announces light earnings and revenues?  They get crushed.  Note Rackable Systems (RACK).

Rackable came clean and is projecting a loss of $683,000 to a profit of $194,000, or a loss of 2 cents per share to a profit of a penny per share.  Rackable Systems expects quarterly revenue to range from $105.5 million to $106.8 million.  Excluding certain expenses, the company expects $4.8 million to $5.3 million in net income, or earnings of $0.17 to $0.18.

Analysts were looking for a higher profit of $0.27 on $106.1 million in revenue.  The company said its earnings and gross margins were hurt by higher-than-anticipated DDR (double data rate) memory pricing, lower-than-expected sales of RapidScale products and more aggressive pricing on some of its contracts due to increased competition.

RACK shares are down 32% at $21.92 in after-hours, and that is after a 2.5% rise to $32.42.  Ouch!

Jon C. Ogg

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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