Last quarter, storage module builder Xyratex (Nasdaq: XRTX) disappointed analysts and investors alike, and the stock has been suffering ever since. At the time, I told you to consider shares of Western Digital (NYSE: WDC) or Seagate Technology (NYSE: STX) if you really had your heart set on a storage buy, and that turned out to be good advice: Xyratex is down a heart-stopping 43% since that day, while Seagate nearly preserved your capital with a 1.7% loss and Western Digital's 14% gain straight-up beat the market.

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 (NYSE: HIT) storage division, as both halves of that deal are customers of Xyratex. One company's synergies and cost savings are another's lost sales, you know.

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.

You're better off just adding a basket of storage stocks to your watchlist, ready to take action when a real opportunity comes up. Click here to get started.

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.