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Rackable's margins still in witness protection program

Q2 turns red

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Rackable's new CEO suffered through a tough first 90 days on the job, as gross margins continued to vanish.

Rackable today reported second quarter revenue of $82m – a 14 per cent year-over-year rise. It also posted a $40m net loss during the period versus a $5.3m profit in the same period last year. The profit disappeared as gross margins dropped to -8.4 per cent from 23 per cent.

The company also copped to $21m in excess and obsolete inventory charges. Ouch.

"In my first 90 days, I have immersed myself in the operational aspects of the company and our supply chain and I believe there is clear opportunity to improve our market position and operating performance," said CEO Mark Barrenechea.

Former CEO Tom Barton was evicted in April, as Rackable's formerly solid results soured. The company depends on Amazon, Microsoft and Yahoo! for the majority of its business and has faced extreme competition for these accounts from rivals. ®

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