UPDATE 1-Rackable Systems posts Q2 loss, shares fall

Mon Aug 4, 2008 5:42pm EDT

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Aug 4 (Reuters) - Data storage solutions provider Rackable Systems Inc RACK.O failed to meet market expectations as it reported a big loss on higher operating expenses, sending its shares down as much as 15 percent in trading after the bell.

The company, however, narrowed its net loss to $27.9 million, or 95 cents a share, from $40.4 million, or $1.42, a year earlier.

Excluding items, loss was 12 cents a share, while analysts were expecting the company to break even.

Revenue fell by about 8 percent to $76.0 million, missing consensus estimates of $76.3 million.

Gross margin on an adjusted basis nearly halved to 9.7 percent.

The company's said its gross margin was hurt by a "single transaction and product shortages," while cost of goods rose due to component shortages.

Rackable Systems, whose customers include Amazon.com Inc (AMZN.O), Electronic Arts Inc ERTS.O, Microsoft Corp (MSFT.O) and Yahoo Inc (YHOO.O), backed its full-year revenue outlook of $353 million to $374 million and adjusted gross margin of 18 percent to 21 percent.

Analysts expect the company to report revenue of $350.4 million for the year.

Shares of the Fremont, California-based company fell to $10.65 in trading after the bell. They closed at $12.55 Monday on Nasdaq. (Reporting by Anurag Kotoky in Bangalore; Editing by Anil D'Silva)

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