Rackable: Fiscal 1Q09 Financial Results
Storage up sequentially 164% while year-over-year sales decreased 11%.
This is a Press Release edited by StorageNewsletter.com on May 6, 2009 at 3:51 pm| (in US$ millions) | 1Q08 | 1Q09 |
| Revenues | 67.8 | 44.4 |
| Growth | -35% | |
| Net income (loss) | (0.8) | (13.4) |
Rackable Systems, Inc. announced its financial results for the first quarter of fiscal year 2009.
Total revenue for the first quarter ending April 4, 2009, was $44.4 million, compared to $38.8 million for the fourth quarter of 2008 and $67.8 million in the first quarter of 2008.
GAAP gross margin from for the first quarter of 2009 was 6.1%, compared to (15.5)% for the fourth quarter of 2008 and 25.9% in the first quarter of 2008. Non-GAAP gross margin for the first quarter of 2009 was 6.3%, compared to 15.1% for the fourth quarter of 2008 and 26.4% in the first quarter of 2008.
“I am pleased with our revenue and working capital progress quarter over quarter, but I am not satisfied with the overall results,” said Mark J. Barrenechea, president and CEO of Rackable Systems. “Although the economic turmoil will remain a challenge in 2009, we are focused on accelerating innovative products to market, controlling expenses and completing the acquisition of Silicon Graphics’ assets, enabling us to achieve better gross margins and customer diversification.”
Rackable Systems ended the first quarter of 2009 with $181.2 million in cash, cash equivalents, long-term and short-term investments, compared to $180.6 million at the end of last quarter.
The Company’s lower gross margin was attributed to three factors: first, reducing high-cost inventories of certain components through aggressive pricing; secondly, the significant revenue mix of our large Internet data center business; and finally, increased competitive pressure from various server vendors offering aggressive deals during the quarter.
GAAP net loss per share from continuing operations was ($0.46) for the first quarter of 2009, compared to GAAP net loss per share of ($0.61) for the fourth quarter of 2008 and GAAP net income per share of $0.09 in the first quarter of 2008. Non-GAAP net loss per share from continuing operations was ($0.24) in the first quarter of 2009, compared to non-GAAP net loss per share of ($0.17) for the fourth quarter of 2008 and non-GAAP net income per share of $0.12 in the first quarter of 2008.
Rackable Systems has received court approval to acquire substantially all the assets of Silicon Graphics, Inc. for $42.5 million in cash, plus the assumption of certain liabilities associated with the acquired assets. The acquisition is anticipated to be completed by approximately May 8, 2009, subject to the satisfaction of closing conditions.
Business and Financial Highlights
- Rackable revenues increased by 14% sequentially, from Q4 2008.
- Delivered two ICE Cube Containerized Data Centers.
- Introduced and delivered evaluation units of CloudRack C2, a unified cabinet that combines extreme densities with breakthrough energy efficiency for cluster computing. CloudRack C2 delivers dramatic bottom-line savings by eliminating “stranded power” with innovative Power XE technology for maximum power usage, cooling efficiency and staggering server densities.
- Launched more than 30 server configurations supporting of Intel Xeon processor 5500 series (codenamed Nehalem), all of which leverage the performance and density advancements of Intel’s new architecture.
- Launched Rackable Eco-Partner Program to recruit and train channel partners to grow the revenue on a worldwide basis. Channel revenue increased 89% over Q4 2008 and 49% from Q1 2008.
- Rackable’s cash and working capital management continue to be a core strength during the economic downturn.
- Total operating expenses, excluding stock-based compensation charges, were $14.8 million in the first quarter of 2009, compared to $13.9 million in the first quarter of 2008. Q1 2009 expenses include $3.5 million of acquisition-related charges.
- The company continues to diversify its customer base and acquired over 25 new customers for the first fiscal quarter, including in verticals such as telecommunications, government agencies (DoD), advanced scientific research, digital media and Internet.
- Suspended our previously-announced stock purchase program including the repurchase of up to $40 million of the company’s stock.
Rackable Systems will not be making any financial projections for fiscal year 2009 at this time due to the uncertainties in the market and the Company’s in-process acquisition of Silicon Graphics.
Comments
Here are some abstracts of the conference call transcript:
Jim Wheat, CFO:
"Among our 10% customers in the first quarter, were Amazon and
Microsoft. Internet and financial vertical markets represented 72% and
13% of total revenue for the first quarter of FY '09 respectively.
"Storage revenue for the first quarter represented 25% of total company
revenue. Our storage was up sequentially 164% while year-over-year
sales decreased 11%."
Mark Barrenechea, president and CEO:
"As announced, last week we received court approval to acquire
substantially all the assets of Silicon Graphics for 42.5 million in
cash plus the assumption of certain liabilities associated with the
acquired assets.
The increased purchase price was a result of the auction process approved by the bankruptcy court in New York.
"We anticipate closing the transaction within the next few days, subject
to closing conditions in the agreement. Let me provide more detail on
the acquired assets. Internationally, on the agreement, we would
purchase the equity of the SGI operating subsidiaries. We would also
purchase the equity of SGI's U.S. federal business. Essentially, it is
SGI's domestic non-federal U.S. business entities that are going
through the bankruptcy process.
"Thus, once the transaction closes, our business will become
immediately operational in over 25 countries, including the U.S.,
Canada, Brazil, UK, Germany, France, Spain, Italy, Eastern Europe,
Israel, Japan, China, Australia, India and Korea. Just to highlight the
larger I.T markets, this would result in an installed base of over
5,000 customers.
As for assumed liabilities, under the agreement, we would not be
assuming Silicon Graphics approximate $150 million of secured debt.
"We expect to streamline operations and eliminate redundant positions,
resulting in an initial 10% reduction in personnel. We anticipate a
global workforce of approximately 1,250 employees soon after closing.
"For internal purposes, the company is currently planning on fiscal year
2010, non-GAAP revenues of 500 million USD and non-GAAP gross margin in
the twenties."
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