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Thursday, April 24, 2008

Rackable (RACK) ... a little more color

So Rackable revenues were abysmal. 81mm estimate, comes in at 68mm. Ridiculous. Guide to 68-72mm with street at 88mm. Awful!

But... gross margins were an absolute blowout, coming in at 23.5 - 24.0% depending on whether you're using GAAP or non-GAAP. Estimates were for 16%. That's obviously gigantic. The company must have made a decision to walk away from some unprofitable business. The stock gets no credit for its price to revenue valuation (it trades at under 1* that metric and can't be valued on that. The book value is 70% of the share price. The revenue bar is coming in so much but they're still guiding to 350mm in sales for the year. Just for perspective, 67+72 (the revs they put up and guided to) get you to 139mm. So they're saying the second half of the year will be over 200mm? Margin guidance is going to be key here as they're telegraphing an awful lot of growth.

I wonder if this stock couldn't work after all.

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