Rackable: Fiscal 1Q08 Financial Results

Rackable Systems, Inc.
announced financial results for the first quarter of fiscal year 2008.

Total revenue for the first quarter of 2008 was $68.0 million,
compared to $72.0 million in the first quarter of 2007. GAAP gross
margin for the first quarter of 2008 was 23.5%, compared to 12.5% in
the first quarter of 2007. Non-GAAP gross margin for the first quarter
of 2008 was 24.0%, compared to 13.5% in the first quarter of 2007.

GAAP net loss was ($0.10) per share for the first quarter of 2008,
compared to GAAP net loss of ($0.36) per share in the first quarter of
2007. Non-GAAP net income was $0.06 per diluted share in the first
quarter of 2008, compared to a net loss of ($0.13) in the first
quarter of 2007.

"In reflecting on my first year as CEO at Rackable, we improved
our non-GAAP gross margins four quarters in a row, increased our cash
position by 22% year-over-year, and rebuilt the management team," said
Mark J. Barrenechea, President and Chief Executive Officer of Rackable
Systems. "While our first quarter is seasonally weak for revenue, we
improved gross margins by over 70% and non-GAAP EPS by $0.19
year-over-year. The progress we have made over the previous four
quarters and our results in the first quarter reflect our belief in
the long-term staying power of Rackable."

Rackable Systems ended the first quarter of 2008 with $206.9
million of cash, cash equivalents and short and long-term investments
compared to $198.1 million as of December 29, 2007 and $170.1 million
as of March 31, 2007.

Non-GAAP financial measures disclosed in this press release
exclude stock-based compensation; amortization of intangible assets
related to the company’s acquisition of Terrascale, amortization of
patents and customer lists, quarterly payout related to the Terrascale
acquisition, and related adjustments to the tax provision. The
reconciliation between GAAP and non-GAAP financials is provided in the
tables accompanying this press release.

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

• Annual revenue is projected to be in the range of $ 353 – $ 374
  million
• Annual GAAP Gross Margin is projected to be in the range of
  17.6 % to 20.6 %
• Annual non-GAAP Gross Margin is projected to be in the range of
  18% to 21%
• Positive non-GAAP EPS for the full year 2008
• Increase in cash and investments, year-over-year

Rackable Systems, Inc.