Why Super Micro Computer Plunged
Jul 19th 2012 3:46PM
Updated Jul 19th 2012 3:48PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Super Micro Computer (NAS: SMCI) plunged today by as much as 13% after the company released preliminary estimates for its fiscal-fourth-quarter results.
So what: The official earnings report isn't until August 7, but the company now expects revenue to be $275 million, below its previous guidance range of $280 million-$310 million. Adjusted earnings per share are also much worse than expected, and should come in between $0.18 and $0.19, hardly comparing to its previous guidance of $0.27-$0.32.
Now what: Gross margin is also taking a hit, primarily due to price reductions on hard disk drive inventory because the company had an oversupply. Higher R&D costs for new products and marketing are also hurting its bottom line in the short term, according to CEO Charles Liang. Those added costs are leading Super Micro Computer to see operating expenses rise higher to the tune of $1.7 million-$1.9 million sequentially. A weak top line, higher expenses, and soft bottom line are all part of the formula for a sell-off.
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