Last quarter, storage module builder Xyratex
That includes a 13% drop in Xyratex shares today, because last night's second-quarter report was another disaster. Sales fell by 9% from the first quarter, to $360 million, at the low end of management guidance and well below the $374 million expected by your average analyst.
Management points to "soft" demand for 2.5-inch disk-drive components and fallout from Western Digital's acquisition of Hitachi's
All is not lost as gross margins in the networked storage segment improved and helped Xyratex beat earnings estimates with $0.24 of non-GAAP earnings per share. Assuming that the damage from the Hitachi deal has already been dealt, Xyratex could become a tremendous turnaround story from this low point. The company also announced a $50 million share repurchase plan, which seems perfectly timed to take advantage of an undervalued stock and could end up reducing the share count by nearly 10%.
However, it'll take a couple of quarters before that turnaround really kicks in, and I expect the share price trough to last for some time. In other words, there's no need to rush into any buy-or-sell decisions today. Itchy trigger fingers often get hurt.
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