Silicon Graphics stock drops as sales forecast cut

NEW YORK (AP) -- Shares of Silicon Graphics International Corp. fell by one-fourth to a recent low Thursday, a day after the computer equipment and services provider cut its fiscal-year sales and profit forecasts, saying some of its customers are delaying their orders and its profit margin is shrinking.

THE SPARK: Silicon Graphics reported a smaller loss, when it released its fiscal third-quarter results after the markets closed on Wednesday, and its adjusted earnings beat analysts' average forecast, according to FactSet.

In the three months that ended March 30, the company lost $1.2 million, or 4 cents per share, compared with a loss of $2.3 million, or 7 cents per share, a year earlier.

The company said its adjusted earnings were 11 cents per share, while analysts were expecting an adjusted loss of 3 cents per share and $189.9 million in revenue.

SGI reported revenue of $199.4 million, up 39 percent from the third quarter of 2011.

Silicon Graphics said one large deal that was expected to close in the fiscal fourth quarter has been delayed, and other customers have not placed orders because they are waiting for the company to launch new products. Those product launches are planned for late in the current quarter.

The company now expects to report $750 million to $770 million in annual revenue, including $177 million to $197 million in the fourth quarter. Silicon Graphics had forecast revenue of $770 million to $800 million for the full year.

Analysts on average were expecting $208.9 million in revenue for the fourth quarter and $772.9 million for fiscal 2012, according to FactSet.

The Fremont, Calif., company expects to report an adjusted loss of 37 cents to 52 cents per share in the fourth quarter, compared with an average forecast from analysts for adjusted earnings of 16 cents per share.

For the year, the company said it expects an adjusted loss of 15 cents to 30 cents per share, compared with an average analyst forecast for adjusted earnings of 24 cents per share.

THE BIG PICTURE: The company's computers and services are used in data centers that are becoming more critical as more companies and consumers store files on remote servers so the information can be summoned on any device with an Internet connection.

But it offered a downbeat full-year outlook in February and said most of its problems were caused by the weak economy in Europe and the high cost of doing business on the continent. In March, Silicon Graphics said it will cut about 25 percent of its work force in Europe and close some offices there. It said those moves will save it around $7.5 million a year.

SHARE ACTION: Silicon Graphics International shares plunged $2.40, or 26.4 percent, to $6.70 by early afternoon, their lowest price since September 2010. The stock has lost more than two-thirds of its value since its peak last early May.