Rackable, er Sgrackable, Racka-GI, the company that just bought SGI, announced its first quarter results yesterday. The company lost $.46 per share,
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.
But more worrisome is the rapidly evaporating margin
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.
It might be time to recall Guy Kawasaki’s first rule of business: charge more for product than it costs you to make. Rackable explains the downward slope thusly
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.
What that explanation says to me is that they made bad bets on technology and got stuck with expensive kit they had to firesale, and that their cost structure is bloated relative to competitors who can outprice them (either because they are big enough to absorb a loss while they drive Rackable out of business or because they have a better cost structure and they are passing savings on). In any case, none of these things is a good sign for a company that just bought out a much larger, also ailing company.
Timothy Prickett Morgan at The Register looks into the numbers in a little more detail, and finds a (tiny) ray of sunshine
The company had sales of $67.8m and a loss of $766,000 in the year-ago quarter, and by comparison, those look like good times. But Q1 2009 is not as bad as the fourth quarter ended January 3, when the economic meltdown hammered Rackable just like it hit every server maker, with sales off 65.1 per cent to $38.8m and a net loss of $18.2m (that’s from continuing operations, by the way).
More of a sliver of sunshine.