SGI's quarter smashed by Europe woes

SGI said it will restructure its European operations after a major shortfall in its fiscal second quarter.

SGI, a technical computing player, reported dismal earnings that fell well short of expectations largely due to demand in Europe and high costs related to operating there.

The company reported a fiscal second quarter net loss of $2.25 million, or 7 cents a share, on revenue of $195.2 million, up 10 percent from a year ago. Non-GAAP earnings were 4 cents a share. Here's the problem: Wall Street was looking for a non-GAAP profit of 25 cents a share on revenue of $197 million.

Gross margins in the fourth quarter were 26.7 percent, down 275 basis points from a year ago.

As for the outlook, SGI projected fiscal 2012 non-GAAP earnings of 15 cents a share to 30 cents a share on revenue of $770 million to $800 million. Wall Street was expecting earnings of 67 cents a share on revenue of $756.3 million.

SGI also said fiscal 2012 gross margins will be 26 percent to 28 percent compared to analysts' estimates of 30 percent.

The issue for SGI is Europe. Interim CEO Ron Verdoorn said:

Our overall gross margin was adversely affected by challenging economic conditions in Europe and the high cost of doing business there. We are taking decisive action to align our business for sustainable profitable growth and are planning to restructure our European operation.

SGI shares were down 26 percent in afterhours.