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Xyratex, Ltd. (XRTX) Comments on Third Quarter Results and Fourth Quarter Outlook

Xyratex, Ltd. (XRTX), a leading provider of enterprise-class data storage subsystems and storage process technology, recently announced results for the third fiscal quarter ended August 31, 2008. Revenues for the third quarter totaled $280.8 million, an increase of 19.9 percent compared to $234.2 million for the same period last year.

GAAP net income totaled $7.8 million, or $0.26 per diluted share for the third quarter, compared to GAAP net income of $4.3 million, or $0.14 per diluted share, during the corresponding period one-year earlier. Non-GAAP net income increased 45 percent to $10.8 million, or a diluted earnings per share of $0.36, compared to non-GAAP net income of $7.4 million, or $0.25 per diluted share, in the same quarter a year ago.

Steve Barber, the chief executive officer of Xyratex, commented on the results, “Our performance was satisfactory, given the uncertainty of the economic climate, and was within our expectations. We have once again delivered year-over-year growth. We remain confident in the long term opportunities available to us in each of our businesses. We are seeing some additional pressure on our gross margin percentage in the near term because of the economic climate. However, with our customer breadth and diverse end-user market applications, we believe that we remain reasonably resilient to specific uncertainties in the financial IT market sector.”

He concluded, “Given current conditions, we expect the first half of 2009 to be very similar to the first half of this year.” Following the release of its financials, Calyon downgraded Xyratex to Sell from Add, citing slowing revenue growth, and reduced its price target to $8 from $17. Needham reduced Xyratex to Buy from Strong Buy to reflect a reduced outlook. The company’s shares fell to a 52-week low earlier this week on the earnings announcement.

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