Rackable Systems: Fiscal 4Q07 Financial Results

Rackable Systems, Inc., a leading provider of servers and
storage products for large-scale data centers, announced financial
results for the fourth quarter and fiscal year 2007.

Total revenue for the fourth quarter of 2007 was $111.7 million, up 4.5%
compared to $106.9 million in the fourth quarter of 2006. Total revenue
for the fiscal year 2007 was $353.2 million compared to $360.4 million
in fiscal year 2006. GAAP gross margin for the fourth quarter of 2007
was 25.1%, compared to 18.8% in the fourth quarter of 2006. Non-GAAP
gross margin for the fourth quarter of 2007 was 21.7%, compared to 19.8%
in the fourth quarter of 2006. GAAP gross margin for fiscal year 2007
was 13.9%, compared to 21.4% in fiscal 2006. Non-GAAP gross margin for
fiscal 2007 was 18.4%, compared to 22.4% in fiscal year 2006.

GAAP net loss per share was ($0.65) for the fourth quarter of 2007,
compared to GAAP net income of $0.02 per diluted share in the fourth
quarter of 2006. Non-GAAP net income per diluted share was $0.18 in the
fourth quarter of 2007, compared to $0.19 in the fourth quarter of 2006.

GAAP net loss per share was ($2.42) for fiscal year 2007, compared to
GAAP net income of $0.40 per diluted share in fiscal year 2006. Non-GAAP
net income per diluted share was $0.17 for fiscal year 2007, compared to
$0.94 in fiscal 2006.

During the fourth quarter, the company recorded a preliminary pre-tax
goodwill impairment charge of $ 23.9 million. The GAAP net loss from
operations and GAAP net loss reported for the fourth quarter of 2007 and
for fiscal year 2007 both included this goodwill impairment charge.

“We are very pleased with our Q4 2007
execution, achieving our strongest quarter ever in revenues and a
significant increase in gross margins,” said
Mark J. Barrenechea, President and Chief Executive Officer of Rackable
Systems. “2007 was a breakthrough year for
innovation, demonstrated by the launch of our award-winning ICE Cube
modular data center and numerous advancements in our broad range
of server and storage products. We took the necessary steps to
streamline our day-to-day operations, and our focus remains strong on
providing energy efficient, Eco-Logical data center solutions for our
growing customer base.”

Rackable Systems ended the fourth quarter of 2007 with $198.1 million of
cash, cash equivalents and short-term investments compared to $160.5
million as of December 30, 2006, representing an increase of 23% during
the period.

Business Outlook
Based on current business trends, Rackable Systems’
financial projections for FY 2008 are as follows: