Why Silicon Graphics International Corp. Shares Popped

Is Silicon Graphics' jump meaningful? Or just another movement?

Jan 21, 2014 at 7:24PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Silicon Graphics International Corp. (NASDAQ:SGI) jumped more than 10% during Tuesday's intraday trading, then settled to close up around 4% following a number of new product announcements.

So what: In total, SGI announced four new high-speed data storage products available to order today, which effectively builds on the company's already-strong lineup of high performance computing offerings. 

And remember, shares plunged last week after SGI announced disappointing preliminary fiscal Q2 results, primarily because of weak federal sales in the wake of the recent government shutdown. However, the company also noted core revenue outside the federal business grew 14% over the previous quarter thanks to increased penetration in the enterprise market -- a trend these new products should hopefully encourage.

Now what: However, the stock doesn't look exceptionally cheap at around 17 times next year's estimated earnings, and we shouldn't forget management's insistence that federal program delays are likely to weigh on SGI's results for now. For now, I'm keeping SGI on my watch list until it can prove its enterprise market growth is sustainable over the long term.

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Fool contributor Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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