Why Silicon Graphics International Corp (NASDAQ:SGI)’S F3Q Profit Isn’t Celebrated


Did Silicon Graphics International Corp (NASDAQ:SGI)’s management forget that little open secret on Wall Street that says, “Forward ever, backward never?” Maybe they did and the backlash is obvious. The massive pullback in the stock was no doubt a direct consequence of the management lowering revenue expectations for F2016.

Not only are some investors feeling cheated by the step-down in F2016 guidance, but a law firm has already launched investigation of the company over certain claims of possible violation of investor interest.

What happened?

At its recent quarterly earnings call, Silicon Graphics International Corp (NASDAQ:SGI) set a new but lower revenue target for F2016. The management now says that revenue for F2016 should be $530 million, marking a sharp decrease from the revenue guidance provided earlier.

Back in January, the management of Silicon looked so confident about the future that they didn’t consider revenue forecast in the range of $600 to $625 million too optimistic. But that now seems to be the case with the revenue being modeled down to $530 million in the latest development. The development didn’t impress Wall Street, triggering the expected reaction – mass sellout.

What next?

Did the management deliberately mislead investors when they provided the earlier strong revenue outlook? That’s the question some are asking and it’s the same one guiding investigations that have been launched against the board and officers of Silicon Graphics International Corp (NASDAQ:SGI). Pomerantz LLP said it was investigating Silicon on behalf shareholders to see if the company violated certain security laws in the flip-flop over revenue guidance.

Strong results drowned in outcry

Despite the fallout over tepid F2016 headline guidance, Silicon Graphics International Corp (NASDAQ:SGI) did post impressive results in F3Q2016. The company reported revenue of $132 million and EPS of $0.03, marking the second quarter in a row that it posted non-GAAP profits despite sales missing expectations.

For the current quarter, Silicon Graphics International Corp (NASDAQ:SGI) is looking for revenue of $120 million and it expects the quarter to be profitable as well.


Leave A Reply