Why Super Micro Computer Plunged

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What: Shares of Super Micro Computer (Nasdaq: SMCI  ) plunged today by as much as 13% after the company released preliminary estimates for its fiscal-fourth-quarter results.

So what: The official earnings report isn't until August 7, but the company now expects revenue to be $275 million, below its previous guidance range of $280 million-$310 million. Adjusted earnings per share are also much worse than expected, and should come in between $0.18 and $0.19, hardly comparing to its previous guidance of $0.27-$0.32.

Now what: Gross margin is also taking a hit, primarily due to price reductions on hard disk drive inventory because the company had an oversupply. Higher R&D costs for new products and marketing are also hurting its bottom line in the short term, according to CEO Charles Liang. Those added costs are leading Super Micro Computer to see operating expenses rise higher to the tune of $1.7 million-$1.9 million sequentially. A weak top line, higher expenses, and soft bottom line are all part of the formula for a sell-off.

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Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On July 19, 2012, at 4:22 PM, JeanDavid wrote:

    I never thought about buying stock in this company. In fact, it never occurred to me that they might be publically traded. I did buy one of their X5DP8-G2 motherboards in late 2003, and it has worked just fine ever since, 24/7/52. If I were to build a new computer, I would not hesitate to buy another of their motherboards. But the one I have is already obsolete, only 8 or so years later.

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