SGI Stock Soars 25 Percent on Earnings Gains

sgi-earnings

SGI celebrated its earnings by displaying fireworks on its home page. Investors were no doubt giddy as well as SGI shares gained 25 percent Thursday.

Shares of server and storage specialist SGI soared Thursday, gaining more than 25 percent after the company reported stronger-than-expected earnings and said it expects to be profitable in 2011. Buoyed by the news, investors bid up SGI shares to $13.72, a gain of $2.82 (25.9 percent) in trading Thursday on the New York Stock Exchange.

What's lifting SGI's shares and stock price? Its biggest customer is Amazon.com, which continues to buy servers to support the growth of its Amazon Web Services cloud computing platform. SGI said Amazon accounted for more than 10 percent of its revenue, meaning the company bought at least $17.5 million in servers and storage in the quarter.

"SGI delivered the best quarter in its history," said SGI CEO Mark J. Barrenechea. "These record results underscore the success of our product strategy and execution, focus on operational excellence and commitment towards profitability. Given our business trends are improving, we are raising our FY11 non-GAAP revenue guidance and we expect to be profitable."

SGI posted revenue for its fiscal second quarter ended December of $177.5 million, up 88.6% from a year ago. The company also raised its guidance, saying it now sees revenue of $570 million to $595 million, up from a previous range of $550 million to $575 million;

The earnings results reinforced the progress the company once known as Rackable Systems has  made since acquiring Silicon Graphics in May 2009 and repositioning the company and its brand.

"We have now operated as a combined company for six quarters,"said SGI CFO James Wheat. "Over that period, I am pleased with our track record of continued execution. We have reduced our inventory, consistently controlled expenses, maintained a strong debt-free balance sheet, and institutionalized processes that will allow the company to scale on a lower cost basis."