swung to a loss in the third quarter due to acquisition charges, but projected stronger-than-expected sales and earnings for the current quarter.
The Milpitas, Calif., computer maker said it generated $80.5 million in revenue during the third quarter, below Wall Street expectations and at the low end of its own guidance, which pegged revenue between $80 million and $85 million.
While Rackable's third-quarter sales were up 40% year over year, they were down 9% from the second quarter.
Investors hammered the stock in July when Rackable delivered the sequentially-lower third-quarter guidance, sending the company's shares down 39%.
With the mediocre third-quarter already priced into the stock, shares of Rackable edged up nearly 8%, or $2.30 in extended trading Monday, to $31.19.
Rackable competes with
selling servers and storage products used by large Internet firms. The company counts
among its customers.
Rackable CEO Tom Barton said that the customer order delay that hurt third-quarter revenue, has been secured for the fourth quarter and was larger than expected. As a result of that order, as well as strong bookings momentum for the past 60 days, Barton said the company now expects to surpass its full year 2006 projections.
Rackable recorded a loss of $389,000, or one penny a share, in the three months ended Sept. 30, due to $3 million in charges for R&D and amortization of intangibles associated with its acquisition of
, as well as $6.1 million in stock-based compensation expenses. At this time last year, Rackable earned $4.4 million in net income, or 20 cents a share.
Excluding the charges, Rackable said it earned 19 cents a share, a penny shy of Wall Street expectations.
Looking ahead, Rackable projected $100 million to $110 million in fourth-quarter revenue, with EPS of 25 cents to 27 cents excluding certain charges. Analysts polled by Thomson Financial were looking for $94.3 million in fourth-quarter sales with 23 cents EPS.
"We are now actively supplying our products to 9 of the top 20 Internet sites and are on track to deploy to a 10th during the fourth quarter," said CEO Barton.
During the third quarter, Rackable said storage revenue accounted for 16% of total revenue, up from 8% in the year ago period.