Note on Warning

Rackable Systems, Inc.

January 17, 2007

Today Rackable Systems announced that it estimates that Q4 2006 revenues were in the range of $105.5 to $106.8 million, and that GAAP earnings would be in the range of a loss of 2 cents to a gain of 1 cent per share. They also stated that non-GAAP earnings would be $0.17 to $0.18 per share.

This puts revenues in the mid-range of the guidance given at the 10/30/2006 analyst conference, but GAAP earnings per share way below the projected $0.10 to $0.12 per share.

The press release indicated that earnings were impacted by unexpectedly high costs of memory and price competition. My guess is the competition was from Dell, which finally starting competing with AMD Opteron based servers.

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Copyright 2006 William P. Meyers