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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Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Fool owns shares of Western Digital. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.