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Rackable Systems, Inc. Q4 2007 Earnings Call Transcript

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2008-02-06 17:18:09.0

Tags: Rackable Systems

Question-and-Answer Session

Operator

(Operator Instructions). We will take our first question from Tom Curlin with RBC.

Tom Curlin - RBC

Hey, just quickly a clarification, did you just give a non-GAAP EPS guide or did I misunderstand or miss here those last few comments on non-GAAP?

Madhu Ranganathan

Tom this is Madhu. We said non-GAAP EPS positive for FY08.

Tom Curlin - RBC

Okay. The transition in terms of the revenue mix, can you comment on what you are assuming from your historically largest customers?

Mark Barrenechea

Tom, hi, it's Mark. We're not breaking out customers or amounts, if you will. And I think all companies have histories and unfavorable revenues. We are focusing '08 on profitable growth. It seems like a good opportunity for us to begin this transition. And I also think it reflects good corporate discipline and a culture and tone that we're setting in the business. So, we're not getting down to customer or dollars specifics.

Operator

We'll take our next question from Louis Miscioscia with Cowen and Company.

William Chiew - Cowen and Company

Hi, this is [William Chiew] for Louis Miscioscia. I guess my question would be, if you can add a little more color on the gross margin benefit this quarter, whether it will looks like it could be sustainable towards 2008. What are other components of it, and maybe so we understand better, what does your business model in '08 look like? Thank you.

Mark Barrenechea

Yeah, sure thanks. I will take part of that and Madhu, if you want to add, obviously feel free to do so. Q4 was a stellar quarter for us. We had strong sales across our installed base. We executed well in the supply chain, and many of our operational improvements in '07 started to flow through the P&L. So, it's just a real solid quarter for us.

As I look into '08, obviously revenue and gross margin are always tied together. And I'm focused on two items, really the higher end of our range and items in my control. We don't control the economy or rational competitors or market mood; what is in our share of influence is ensuring that we've new product lines to the market in '08 and our newly product introduction goes extremely well around deduplification, virtualization, new form factors, cost control in '08 and with good to great execution there is a path to the higher range, higher range of that 17% to 20% in '08.

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