Super Micro grows despite Xeon E5 delay, disk shortages

Motherboard and system maker Super Micro has been anticipating the bump in revenues from Intel's "Sandy Bridge" family of Xeon E5 chips and their related "Romley" server designs for nearly a year, and finally the Romley romp has begun.

In the company's third quarter of fiscal 2012 ended in March, revenues rose by 2.5 per cent, to $240.2m, but because of investments in a factory in Taiwan that is only starting to ramp now and higher disk drive prices, net income fell by 33.8 per cent, to $7.1m. That works out to 17 cents per share.

"Some customers anticipated the product transition and postponed acquisitions," said Charles Liang, Super Micro's founder and CEO, in a conference call with Wall Street analysts referring to the Xeon E5-2600 processor launch on March 6. "We are now positioned for strong growth for the next several quarters."

Super Micro had been hinting since last summer that it expected the Xeon E5s to come out in the early fall and then maybe before year's end, but that didn't happen. Despite the transition to new Xeon chips from Intel and Opteron processors from Advanced Micro Devices, the quarter was not so bad in terms of the top line. But clearly Super Micro had to cut some deals to close some deals in the quarter, and this also impacted profits.

Liang said that it has secured long-term disk supply contracts with suppliers and that the drive shortages caused by the flooding in Thailand were now largely behind it. The Xeon E5 ramp and Super Micro's move up the hardware stack to rack-ready solutions, including storage and networking, were also positioning the company well among service providers and others looking to build clouds. Once the factory in Taiwan is fully ramped, it will be cheaper for Super Micro to build boards and boxes for Asian customers, which should help the bottom line, and it will have more capacity to chase more deals in Asia, which should help the top line.

Howard Hideshima, Super Micro's CFO, said the company sold 57,000 complete servers in fiscal Q3, which is 5,000 few machines than it shipped in fiscal Q2. Average selling prices for these systems kept on rising thanks to the fatter configurations, though, with ASPs hitting $2,000, up from around $1,400 a year ago and from $1,800 in the second fiscal quarter ended in December 2011.

These systems generated $116.5m in revenues. Super Micro sold 1.21 million server motherboard and other components in the quarter, which generated $123.7m in revenues. That was a 21 per cent jump in component shipments sequentially from fiscal Q2, but a 12 per cent decline in component revenues.

During the quarter, hyperscale data center customers accounted for 15.7 per cent of sales, or $37.7m, more than two and a half times more sales than it had to these customers a quarter ago. Sales of servers and parts to OEM partners and directly to customers accounted for $113.8m in sales (just a bit higher sequentially).

The United States accounted for 56.5 per cent of sales for Super Micro in fiscal Q3, compared to 23 per cent for Europe, and 18.1 per cent for Asia.

Liang said it was anxious to push its full lineup of Xeon E5 machines and the other members of its X9 server and storage family, which have 30 per cent more SKUs than the prior X8 generation of Super Micro iron. These include future microservers based on Intel's "Ivy Bridge" uniprocessor Xeons as well as servers called Fat Twin that will put 2, 4, or 8 nodes into a 4U node enclosure. Super Micro's GPU-optimized servers are already tuned up to accept the future "Kepler" GPU coprocessors as well as Intel's "Knights Corner" MIC parallel x86 coprocessor. Super Micro has also designed servers and storage that can operate at 47 degrees Celsius, which should be able to radically cut down on the AC bills in the data center.

Looking ahead, Super Micro expects for revenues in the June quarter, the last one of its fiscal 2012, will come in between $280m to $310m, which is a 13 per cent increase at the midpoint on a year-on-year basis and up 23 per cent sequentially at the midpoint of that guidance. The company expects non-GAAP earnings per share to be between 27 and 32 cents, which compares quite favorably to the 19 cents per share in non-GAAP EPS in Q3 of fiscal 2012. ®