(Bloomberg) -- Shares of Super Micro Computer Inc. plunged on Wednesday after the server maker issued a disappointing sales forecast and failed to give a timeline for filing its previous fiscal year’s official financial statements.
Revenue will be $5.5 billion to $6.1 billion in the quarter ending in December, the company said in a statement on Tuesday, well below analysts’ projections of $6.79 billion. Its profit outlook, excluding some items, also fell far below estimates.
Super Micro has had a tumultuous year. Shares rose at the start of 2024 as investors bet the AI boom would fuel demand for the company’s high-powered machines, earning the stock inclusion in the S&P 500. But then a former employee alleged earlier this year in federal court that Super Micro had sought to overstate its revenue. Short seller Hindenburg Research referenced those claims in a research report, alleging “glaring accounting red flags.”
The embattled server maker also missed an August deadline to file its annual financial report and last week its auditor Ernst & Young LLP resigned, citing concerns about the company’s governance and transparency. An investigation of the accounting issues by a special board committee found “no evidence of fraud or misconduct on the part of management or the board of directors,” Super Micro said in the statement.
Shares of the company have slid 77% since peaking in March, wiping out roughly $50 billion in market value. The stock fell as much as 27% after markets opened in New York on Wednesday, heading for the biggest intraday decline in a week.
Sales were hurt in the fiscal first quarter by the availability of semiconductors, Chief Executive Officer Charles Liang said. When asked on a conference call Tuesday whether the company’s accounting issues had affected its relationship with Nvidia Corp., which is the top producer of powerful processors for artificial intelligence, executives said the chipmaker hasn’t made any changes to Super Micro’s supply allocations.
“At this moment — according to our relationship, according to our communication — things are very positive,” Liang said of the relationship with Nvidia.
Recently, the failure to file its 10-K financial disclosure and the departure of Ernst & Young has put the San Jose, California-based company at a risk of being delisted by Nasdaq Inc. and booted from the index.
Tuesday’s update was the company’s opportunity to ease investor fears. N Quinn Bolton, an analyst at Needham, suspended his rating of Super Micro after the resignation of Ernst & Young. In a note ahead of the event, he said the update from Super Micro could provide an opportunity to reassess the suspension. Instead, it triggered a sell-off of the company’s stock.
“This could signal the beginning of a prolonged slide, with customers possibly seeking alternative providers due to Super Micro’s accounting issues,” said Woo Jin Ho, an analyst at Bloomberg Intelligence. “Its inability to provide timing for when it will file its 10-K increases the likelihood of a Nasdaq delisting, posing a major overhang.”
Super Micro said it “continues to work diligently” on the financial filing delays and continues to stand by previously issued disclosures, but can’t predict when the delayed form will be filed. The board’s special committee said it would recommend improvements to internal governance or controls in addition to “other work that is ongoing.”
Nasdaq rules give the company until mid-November to submit a plan to restore it to compliance. If Super Micro’s plan is approved, the company could get extra time to file its disclosures — pushing the deadline to February 2025. “The company intends to take all necessary steps to achieve compliance with the Nasdaq continued listing requirements as soon as possible,” Super Micro said.
For the quarter that ended in September, Super Micro said preliminary results show sales of $5.9 billion to $6 billion. Analysts, on average, estimated $6.47 billion. Profit, excluding some items, was about 76 cents per share, the company said. Wall Street expected 74 cents. The results could change upon review by a new accounting firm, Chief Financial Officer David E. Weigand said on the conference call.
At the start of the call, executives said they wouldn’t answer questions about Ernst & Young’s departure or the financial filing delays. That didn’t stop multiple analysts from trying.
“We’re diligently looking to replace the auditor as quickly as possible,” Weigand said when asked whether the company was comfortable with its ability to meet the deadline. “We will be filing a plan with Nasdaq regarding an extension.”
(Updates with post-open share move in the fifth paragraph.)
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