Shares of Silicon Graphics Inc. plummeted Monday after officials said the company would post a loss of 20 cents per share in its first quarter, far below even the most conservative Wall Street estimate.
In early-afternoon trading, SGI's stock plunged more than $9 per share. The current price.
First Call consensus expected SGI to post a profit of about 21 cents per share this quarter, coming on the heels of record fourth-quarter revenues of $1 billion and earnings of 56 cents per share.
"It's certainly a big surprise," said Richard Chu, an analyst at Cowen & Co. in Boston. "The company's credibility has been shot. To come up well short of what were very realistic earnings and sales numbers shows they have some real issues."
SGI officials said revenue for the quarter would be about $760 million, compared with $765 million for the first quarter last year. The company, based in Mountain View, Calif., will also take a one-time charge in the first quarter related to its acquisition of ParaGraph International.
Investors and analysts are still waiting for the real SGI to stand up.
After beating analysts' estimates by 22 cents per share last quarter, the 20-cent-per-share shortfall is bewildering.
"It doesn't make a lot of sense," Chu said. "It's going to take some time for SGI to repair this loss of confidence."
Slower sales in the server business, coupled with a sluggish September, are the only plausible excuses that SGI officials could offer.
"We anticipated a seasonally weak September quarter, especially after record revenues in the June quarter," said Chief Executive Ed McCracken. "But the results were significantly lower than our expectations."
Merrill Lynch cut its rating on the stock to "near-term neutral" from "near-term accumulate."
Whether this quarter's disappointing results are symptomatic of more significant problems ahead or merely a brief aberration, company officials said they will step up marketing efforts before matters get out of hand.
"We believe the markets that we're focused on are fundamentally healthy," McCracken said. "However, we clearly need to intensify our marketing and sales programs to take advantage of these growth opportunities. At the same time we are reviewing our operating expenses in light of current business conditions."
SGI officials said the company will report earnings Oct. 23.