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Rackable Systems' Sales Slump

Stocks in this article: RACK

Rackable Systems (RACK) swung to a loss in the third quarter, as sales fell 25%.

The Fremont, Calif., computer maker posted a loss of $5.9 million, 20 cents a share, in the third quarter, vs. break-even results at this time last year.

Excluding $2.7 million in stock option expenses, and about $1.2 million in investment impairment and amortization charges, Rackable lost 5 cents a share. Analysts polled by Thomson Financial were looking for a loss of 7 cents a share, excluding special items.

For the three months ended Sept. 27, sales fell to $65.3 million from $87.2 million at this time last year.

Rackable warned investors last month that the global economic crisis was hurting its financial performance, as corporate customers cut spending on servers and other technology.

Last week, Sun Microsystems (JAVA) posted a $1.7 billion loss that included a hefty writedown as a result of slowing demand. Hewlett-Packard (HPQ) and Dell (DELL), two of the other large server makers, are due to report quarterly financial results later this month.

In a statement Monday, Rackable CEO Mark Barrenechea said the company will continue to manage costs and "drive operational efficiencies" during the period of economic uncertainty.

He pointed to the company's expanding menu of products, including an innovative type of server designed for online customers, and said that Rackable has more products in the offing.

Rackable reaffirmed its most recent projection that sales in 2008 will range between $275 million and $300 million and a loss of 8 cents to 16 cents a share, excluding special charges.

Shares of Rackable were off 23 cents to $6.99 in extended trading Monday.

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