Rackable Systems Q2 sales fall 7.5%

Reaffirms Full Fiscal Year 2008 Outlook: Rackable Systems has announced financial results for the second quarter of fiscal year 2008 and reaffirmed full fiscal year 2008 outlook. Total revenue for the second quarter of 2008 was $76.0 million, compared to $82.2 million in the second quarter of 2007. GAAP gross margin for the second quarter of 2008 was 9.2%, compared to (8.4%) in the second quarter of 2007. Non-GAAP gross margin for the second quarter of 2008 was 9.7%, compared to 17.5 % in the second quarter of 2007. The Company's gross margin was impacted by two independent factors – a single transaction and product shortages – which we expect to be limited to the second quarter. The Company won an important opportunity at lower pricing, which we believe will put us in an advantageous position for more profitable, long-term opportunities. In addition Rackable Systems experienced component shortages, which resulted in higher cost of goods sold. GAAP net loss was ($0.95) per share for the second quarter of 2008, compared to GAAP net loss of ($1.42) per share in the second quarter of 2007. Non-GAAP net loss was ($0.12) per diluted share in the second quarter of 2008, compared to a net income of $0.02 in the second quarter of 2007. Rackable Systems ended the second quarter of 2008 with $206.2 million of cash, cash equivalents and short and long-term investments compared to $198.1 million as of December 29, 2007. “Our business outlook for the second half of 2008 is positive and we are reaffirming our 2008 annual guidance,” said Mark J. Barrenechea, President and Chief Executive Officer of Rackable Systems. “Our new XE series product is in the market, our industry focus is yielding results, and our core Internet market is expanding into cloud computing. We see these as favorable trends for the second half of 2008 and into 2009.” Q2 2008 Business Highlights

• The Company entered into an agreement with IBM to offer their BladeCenter servers integrated with its ICE Cube modular data centers.
• Keeping a rapid pace of innovation, Rackable Systems introduced five new server solutions that double the compute density of its existing servers while significantly increasing efficiency. These extreme efficiency, high-density products are optimized for Internet, cloud computing and HPC environments.
• Rackable Systems recently won an ICE Cube contract for the US Federal Government and booked its first business in Japan.

Business Outlook for Fiscal Year 2008 The Company reaffirmed its fiscal year 2008 annual outlook 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 to $374 million
• 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 year-over-year cash, cash equivalents and investments