Shares of Silicon Graphics International Corp. (SGI) plunged over 23 percent in extended trading on Tuesday after the computing and storage solutions provider reported a loss for the second quarter compared to profit last year, hurt by lower margins and charges. Adjusted earnings per share also missed analysts' expectations. Further, the company also slashed its earnings guidance for the full-year 2012, while raising revenue forecast.
"Our products are in high demand and we are taking share in the market. At the same time we faced some challenges in Q2 impacting our margins. Our overall gross margin was adversely affected by challenging economic conditions in Europe and the high cost of doing business there," interim CEO Ron Verdoorn said in a statement.
In mid-December 2011, the company's CEO Mark Barrenechea tendered his resignation as president, chief executive and board member, effective January 1, 2012. Chairman Ronald Verdoorn took over as interim CEO, while the board conducts a search for a new CEO.
The Fremont, California-based company reported a net loss of $2.26 million or $0.07 per share for the second quarter, compared to net income $3.72 million or $0.12 per share in the prior-year quarter.
Excluding items, adjusted net income for the quarter dropped to $1.25 million or $0.04 per share from $13.64 million or $0.44 per share in the year-ago quarter.
On average, 3 analysts polled by Thomson Reuters expected the company to report earnings of $0.25 per share for the second quarter. Analysts' estimates typically exclude special items.
Revenue for the quarter grew 10 percent to $195.2 million from $177.52 million in the same quarter last year, but missed three Wall Street analysts' consensus estimate of $197.05 million by a whisker.
Gross margin for the quarter contracted 275 basis points to 26.7 percent from last year, reflecting the challenging economic conditions in Europe and the high cost of doing business in Europe.
"We are taking decisive action to align our business for sustainable profitable growth and are planning to restructure our European operation. Other contributing factors to the decline in margin, the transition of our service margin profile and the change in product mix are temporary," Verdoorn added.
For fiscal year 2012, SGI now anticipates adjusted earnings in a range of $0.15 to $0.30 per share, on projected revenues between $770 million and $800 million. Street is currently looking for full-year 2012 earnings $0.67 per share on annual revenues of $756.29 million.
Earlier, the company projected adjusted earnings in the range of $0.60 to $0.80 per share on revenues between $740 million and $780 million.
SGI closed Tuesday's regular trading session at $14.37, down $0.39 or 2.64% on a volume of 2.33 million shares. The stock plunged a further $3.32 or 23.10% in after-hours trading.
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