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Author: ultrabrite Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 28  
Subject: ZACKS "Bear of the Day" Date: 6/21/2007 3:14 PM
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Our Bear of the Day recommendation is for Rackable Systems RACK. After having the market for high-density, low-power servers to itself, larger competitors have entered the market where Rackable Systems competes. Industry leaders have much greater resources than Rackable, and have competed aggressively on price. As a result, Rackable has had to cut prices to its largest customers, which accounts for 52% of revenue. Until Rackable can get a meaningful contribution from higher margin storage products, we believe the company will struggle.

http://news.moneycentral.msn.com/ticker/article.aspx?Feed=BW&Date=20070621&ID=7063824&Symbol=RACK

MSN.com has attracted me with free real-time quotes if I log on to my hotmail/integrated windows live account, so I may start gravitating over to that site instead of Yahoo! Finance. I think that Zack's has a good track record overall, so I was surprised to see that RACK is their bear pick of the day. I was just telling myself the downside here is limited.

Granted this is a small company that saw a rapid rise in share price that peaked out a year ago over $50 and is now trading around $12.50 - but that is what gets me interested. I figured it was too expensive when it was selling for $40 and posting better numbers, but now it looks cheap.

I feel this company is a more nimble entity because it is young and smaller than the larger competitors arrayed against it. I'm sure I read a bunch of nice things about them when the stock price was rising. Now the price is way back down to where it was 2 years ago:

http://stockcharts.com/h-sc/ui?s=RACK&p=W&yr=2&mn=1&dy=0&id=p35849231294

So the question is if they can find another niche to exploit? Right now the buzz seems to be on "storage" but that's about all I know about that. Something just feels like it could go right here. I would rather give them the benefit of the doubt because that's what would create upside! (disclaimer - of course this potential "upside" is completely in my imagination at this point.) What are the chances of RACK getting back on track? I guess this is more hunch than cold hard facts.

I am not holding any shares now but would appreciate any comments...

JT :-)
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