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Tuesday, May 27, 2008

Rackable (RACK) weaker on Amazon share loss rumors

Rackable has had a great run from $8 to $13. They missed revenues by a lot last quarter but the stock has remained strong because gross margins improved some 600 bps q/q. There's a story floating around that they're losing share at Amazon, historically a very important customer representing 24% of sales last quarter. Facebook is growing nicely -- they clocked in at 17% of last quarter. Facebook recently raised 100mm to spend almost exclusively on servers.

I think RACK is somewhat vulnerable here at $12.70, though I'd look to re-enter it on material weakness.

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