Rackable Racks Up a Loss

SAN FRANCISCO -- Rackable Systems(RACK - Cramer's Take - Stockpickr) swung to a loss in the fourth quarter, as the company wrote off $24 million in goodwill.

And while the struggling server maker posted better-than-expected results excluding the charges, Rackable served up a weak outlook for the year ahead.

Shares of Rackable were up 13 cents at $8.12 in extended trading Wednesday.

Rackable grew its sales 4.5% year-over-year to $111.6 million in the three months ended Dec. 29, above the average analyst expectation of $106.3 million , according to Thomson Financial.

In a statement, CEO Mark Barrenechea said the fourth quarter was the company's strongest ever by revenue, and cited the progress in gross margin, which increased to 25.1% vs. 18.8% at this time last year.

The Fremont, Calif., company had a loss of $18.9 million, or 65 cents a share, vs. net income of $563,000, or 2 cents a share in the year ago period.

The loss included $23.8 million in charges to reflect an impairment to the company's goodwill, and $4 million in stock compensation expenses.

Excluding these charges, Rackable said it earned 18 cents. Analysts polled by Thomson Financial were looking for adjusted EPS of 5 cents a share, although it was not immediately clear which charges besides the stock compensation were excluded from the estimate.

Rackable said it expects sales for the 2008 to range between $353 million and $388 million, short of the $406 million expected by analysts.

The company said it expects to lose 57 cents a share - and earn 17 cents a share, excluding items -- in 2008, and pegged its GAAP gross margins between 16.5% and 19.5%.

Analysts were expecting earnings of 19 cents a share.

Rackable also said Wednesday that it was bringing in two fresh faces to its board: General Michael Hagee, a former member of the Joint Chiefs of Staff, as well as Douglas King, the former managing partner of Ernst & Young's San Francisco office