Rackable Systems Inc. (
RACK) continues to lead in green technologies for lower power consumption and high-density servers. We remain encouraged by the company's robust product pipeline and significant customer wins.
Rackable trimmed its outlook for fiscal 2008 twice during the year due to the challenging economy. In order to protect margins, the company has reduced its workforce. We have reduced our estimates for Q4 of fiscal 2008 and for all of fiscal 2009. Over the long-term it may be a challenge for RACK to compete with larger hardware vendors. We maintain a Hold rating on RACK shares as we believe the company has limited downside.
Shares of Rackable Systems are currently trading at a P/S multiple of 0.5x our 2009 revenue per share estimate of $8.64, a discount to the industry. We cut our price target to $4.50, which is based on a P/S multiple of 0.5x 2009 revenue.
Priyanka Poddar contributed to the report.
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