Xyratex: Fiscal 4Q08 Financial Guidance

Xyratex Ltd updated its guidance for the fourth quarter ended November 30, 2008.

The company now anticipates revenue for the 2008 fourth quarter to be in the range of $280 to $285 million. This compares to the company’s previously announced targets of $287 to $307 million, with the reduction related to its Networked Storage Solutions business.

The company also anticipates that its GAAP and non-GAAP earnings per share will be significantly below the previously announced target as a result of the lower revenue and a reduction in gross margin for the Networked Storage Solutions business to a range of between 8 and 10%. This compares to 13.3% for the 2008 third quarter and is a result of increased operating costs associated with lower overall volumes, product mix in the quarter, the continued challenges related to the integration of its new ERP system and inventory write downs, primarily related to the effects of the current global economic uncertainty. Our Storage Infrastructure business has performed broadly in line with our expectations for the quarter. In addition, the company will be taking into account the current economic uncertainty in its review of the value of its deferred tax asset and intangible assets which could be a factor in GAAP earnings per share being below the previously announced target.

"Our revised guidance for the fourth quarter reflect the challenging macroeconomic environment as well as a number of gross margin impacts, some of which we anticipate will be non-recurring. Given the current environment, we are planning to reduce costs to better align our expenditures with demand, whilst maintaining our investment in core technologies. This will include a reduction in regular headcount in the first quarter of 2009. Our cash position of approximately $26 million and no debt at year end is in line with our expectations, and coupled with our recently renewed and undrawn bank facilities of up to $55 million provides a strong liquidity position. That said, we will continue to provide increased focus on working capital management," said Steve Barber, CEO of Xyratex.

Xyratex’s fourth quarter 2008 conference call is scheduled for January 6, 2009, at which time the company will discuss final financial results for the fourth quarter and fiscal year end and provide further details of our planned cost reductions.