Silicon Graphics International DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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Rackable Systems

May 2008

This presentation contains forward-looking statements reflecting management’s expectations about our markets, business, products, operating plans

and

financial

performance

well

events

and

circumstances

that

have

not

yet

occurred.

Statements

containing

words

such

"will,"

"expect,"

"believe,"

and

"intend,"

and

other

statements

the

future

tense,

are

forward-looking

statements.

Actual

outcomes

and

results

may

differ

materially

from the expectations expressed or implied in these statements due to a number of risks and uncertainties, including: Rackable Systems operates in

a very competitive market, and increased competition has in the past caused, and may continue to cause, pricing pressure on Rackable Systems'

products, which would negatively affect Rackable Systems' gross and operating margins, as well as other financial measures; and a significant

portion

the

company's

revenues

come

from

small

number

customers,

and

the

delay

placing

order,

the

failure

significant

customer

place

additional

orders,

could

have

significant

negative

effect

Rackable

Systems'

financial

performance.

Accordingly,

caution

you

not

place

undue

reliance

these

statements.

These

risks

and

uncertainties

are

set

forth

our

Annual

Report

Form

10-K

under

the

caption “Risks Factors,”

which was filed with the Securities and Exchange Commission on March 13, 2008 and available at www.sec.gov

<http://www.sec.gov />. This presentation is as of May 9, 2008, and the continued posting or availability of this presentation does not imply that

forward-looking

statements

continue

true

any

later

date.

expressly

disclaim

any

obligation

update

alter

our

forward-looking

statements, whether, as a result of new information, future events or otherwise.

Rackable Systems, ICE Cube, RapidScale, Eco-Logical, Enabling the Eco-Logical Data Center, stylizations and design marks associated with all the

preceding,

and

trade

dress

associated

with

Rackable

Systems,

are

among

the

trademarks

registered

trademarks

owned

licensed

Rackable

Systems, Inc. (“Rackable”).

Any other trademarks referenced herein and their associated stylizations and designs are the property of the respective

owners thereof.

See

Appendix

for

both

GAAP

and

non-GAAP

financial

measures

contained

this

presentation,

together

with

reconciliation

non-GAAP

GAAP

measures.

Important Information

connection

with

the

solicitation

proxies,

Rackable

Systems

filed

with

the

Securities

and

Exchange

Commission

(the

"SEC")

and

mailed

stockholders

definitive

proxy

statement

dated

April

28,

2008.

Rackable

Systems’

stockholders

are

urged

read

the

proxy

statement

and

any

other

relevant documents when they become available as they contain important information. Stockholders may obtain additional free copies of the proxy

statement and other relevant documents filed with the SEC by Rackable Systems through the website maintained by the SEC at www.sec.gov

<outbind://11/www.sec.gov> .

These

documents

can

also

obtained

free

charge

from

Rackable

Systems

Rackable

Systems’

website

www.rackablesystems.com

<outbind://11/www.rackablesystems.com> under the "Investor Info" tab. Stockholders may also contact MacKenzie

Partners, Inc. with questions or requests for additional copies of the proxy materials by calling toll free at (800) 322-2885 or by emailing

rackproxy@mackenziepartners.com. Detailed information regarding the names, affiliations and interests of individuals who are participants in the

solicitation

proxies

Rackable

Systems’

stockholders

available

Rackable

Systems’

definitive

proxy

statement

filed

with

SEC

April

28,

2008.

Safe Harbor Statement, Trademark

References and Non-GAAP

Agenda

Introduction

About Rackable Systems

–

Who we Are

–

What we Have Done so Far

Strategic Plan: Working to Drive Sustainable and Long-Term Growth

Financial Overview

Rackable’s

Strong Leadership and Oversight

–

Current Board has relevant expertise, is experienced and is committed to Rackable’s

success

Leza’s

Nominees Lack Qualifications; Do Not Merit Board Seats

Conclusion

Introduction

Board and new CEO -

Mark Barrenechea -

began company

transformation April 2007

New senior management team assembled in last 12

months

New strategy designed and implemented in last 12 months

Active Board meets regularly to review progress and

results to help drive strategic direction and achievement of

milestones and goals

Dissident investor with only 3,000 shares has nominated

himself and his associate; neither has any relevant

experience or skill to merit positions on the Board

Mission: Enabling the eco-logical data center

About Rackable Systems

Founded in 1999

Publicly traded on NASDAQ since June 2005

Headquarters: Fremont, CA

Company designs and builds in California

FY 2007 Revenue: $ 353.2M

340+ employees

Leading customers in 2007: Microsoft, Amazon, Yahoo!

Markets: Internet, Financial Services, Federal, Enterprise, Media

Founded in 1999

Publicly traded on NASDAQ since June 2005

Headquarters: Fremont, CA

Company designs and builds in California

FY 2007 Revenue: $ 353.2M

340+ employees

Leading customers in 2007: Microsoft, Amazon, Yahoo!

Markets: Internet, Financial Services, Federal, Enterprise, Media

Rackable is Primed

for Growth

Current phase of Rackable began April 2007

Mark Barrenechea appointed CEO

Senior Management team assembled over the past year to

implement growth plans and effectively deliver identified

business and financial performance

Focus on performance-based compensation

Two new and independent Board members added in 2008

Strengthened sales function through recruitment and

redesigned sales strategy

Product innovation reinvigorated to help meet growth

objectives

Rackable Executes:

Results to Date

Diligent Operational & Financial Execution

Non-GAAP gross margin improvement every quarter

for the last four quarters

22% increase in cash and investments –

No debt

47% inventory reduction

56% reduction in FAS 123R stock-based

compensation expense

80% plus revenue growth in new market expansion

Q1 08 results: from March 31, 2007 to March 29, 2008

Strategic Plan:

Working to Drive Sustainable

and Long-term Growth

Eco-Logical

–

Industry-leading power

efficiencies

–

Low-wattage technology

–

Practical density

Build-To-Order

–

Leverage open standards

–

Build to customer

requirements & workloads

Day One Advantage

–

Accelerate customer

leverage of new processors,

architectures & components

Value Proposition

Eco-Logical

Build-to-Order

Day One

Advantage

Eco-Logical

Build-to-Order

Day One

Advantage

X86

Compute

X86

Compute

Storage

Data Center

Infrastructure

Data Center

Infrastructure

2006

2007

2008

2009

2010

2011

x86 Addressable Market

Power trends favor Rackable Systems’

eco-logical focus

Additional projected 5 year spend: > $9 billion

Linux growth: 7.2% CAGR; Current Size: $6.5 billion

Windows growth: 6.2% GAGR; Current Size: $21 billion

Linux

Netware

Windows

Unix

Projected Worldwide x86 Addressable Market

140

100

120

Scenarios

Historical trends

Current

efficiency trends

Best

practice

Improved

operation

State of

the art

Future energy

use projections

Historical

energy use

Source: IDC & EPA

2006

2007

2008

2009

2010

2011

Focus areas for Rackable:

Clustered storage delivers

better cost to value ratios

than traditional FC

NAS

–

Growth: 10.6% CAGR

–

Current size: $3 billion

iSCSI

for block access

–

Growth: 59.2% CAGR

–

Current size: $1.5 billion

Internal

iSCSI

NAS

DAS

Storage Addressable Market

Source: IDC

Worldwide Projected Storage Addressable Market

2006

2007

2008

2009

2010

Internet Spending Growth

Rackable Systems participates in a large and growing market

25% CAGR of internet market in the next 2 years anticipated

Market expected to reach $14.7 billion by 2010

Estimated Server spending by Internet companies

$ Millions

Source: McKinsey & Co July 2007

6,040

8,376

10,071

12,166

14,695

CAGR

2006-2010

25%

Power & Cooling Benefits

Data Center Space Cost

Support Delivery

Installation Cost

Total Cost of Ownership

Build-to-Order

A Leading Value Proposition-

Strong Competitive Advantage

Source: Rackable Systems

Sun

IBM

Dell

Recognition:

Many Awards for Best in Class

Best Hardware Solution

for ICE Cube™

Past awards:

Best Server, Best Grid

Computing Solution,

Most Innovative

Hardware,

Best Cluster Solution

LinuxWorld

Product

Excellence Awards

Intel Server &

Storage

Innovation Awards

ICE Cube

recognized as one

of 6 products for

innovation based on

Intel architecture

Rackable Systems

C2002 server

sets record performance

(twice) for

Oracle Fusion

middleware on

SPECjAppServer2004

Record Performance

for an X86 System

HPCwire

Readers’

Choice Awards

Rackable Systems

wins award for Best

Price/Performance

HPC Hardware

Solutions

ICE Cube data center

judged one of three

best “Large Servers,

Multi-Processor

Computing Systems”

products released

in 2007

TechTarget’s

SearchDataCenter.com

2007 Products of

the Year Awards

Note: 2007 awards

World-Class Customers

Enterprise

Financial Services

Retail

Social Networking

Federal

Internet

Education/Research

Travel

Media/Entertainment

Energy

EDA

Telco

ITA

Several Financial Institutions

Cost and Density

Optimized

Consolidation and

Virtualization

Price/performance

per watt

Capacity

Maximum

Performance

Efficient

Performance

x86 Compute

Superior Products & Solutions

Eco-Logical

Build to Order

Day One Advantage

Leadership

In Product

Segments

Core

Propositions

Win by

Addressing

Workload Needs

Applications

HPC

Virtualization

SaaS

Web2.0

Storage

Superior Products & Solutions

Eco-Logical

Build to Order

Day One Advantage

Best $/TB

High density

As low as 10W per TB

Leadership

In Product

Segments

Core

Propositions

Integrated storage for

scale-out applications

NAS export capabilities

Win by

Addressing

Workload Needs

Linear capacity and

performance scaling

Global namespace

Advanced data protection

Content

Depots

Backup/

Archive

Applications

HPC

Video

Streaming

Storage

Servers

High

Capacity

Storage

Clustered

Storage

Data Center Infrastructure

Superior Products & Solutions

Eco-Logical

Build to Order

Day One Advantage

Flexibility to meet diverse

data center needs

Maximize reliability

Leadership

Leveraging

Diverse

Approaches

Core

Propositions

Maximize efficiency

Simplify infrastructure

Maximize availability

Win by

Addressing

Deployment

Needs

Reduce power 50%

Reduce cooling 80%

Address mobile needs

Greenfield

Data Center

Solutions

Cabinet

Solutions

Container

Solutions

Additive

Capacity

Mobile

Company Growth Plan

New Product

Offerings:

Internet Market

Expansion:

New Market

Penetration:

Data Center

Initiatives:

We pioneered Search & MeshUp:

Target other large sectors: SaaS,

Advertising, Media, eRetail, Classifieds…

Target new verticals: Federal,

Enterprise, Financial Services, x86 HPC,

International channels

Server & Rack Level –

virtualization, SSD,

rack and server efficiencies, management

Storage –

Clustered (iSCSI

& NAS), D2D

IceCube

Advantage –

Savings of 50%

Facilities, 80% Cooling, 50% Power

Simplify Infrastructure

Financial Overview

$0.25

$0.10

$0.15

$0.20

Q108 and FY07 Highlights

Solid consecutive increase in non-GAAP gross margin –

78% year-over-year

Steady improvements in non-GAAP EPS -

$0.19 year-over-year

Non-GAAP EPS

Non-GAAP Gross Margin

25%

20%

15%

10%

Q107

Q207

Q307

Q407

$0.05

$(0.05)

$(0.10)

$(0.13)

$0.02

$0.09

$0.18

13.5%

17.5%

19.2%

21.7%

$(0.15)

Q108

24.0%

Q107

Q207

Q307

Q407

Q108

$0.06

$0.19

improvement

Improvements in non-GAAP Gross Margins and EPS

See Appendix A for both GAAP and non-GAAP financial measures contained in this

presentation, together with a reconciliation of non-GAAP to GAAP measures.

Q108 Highlights

Team is Delivering on our Strategy

Revenue

$68.0M

Non-GAAP Gross Margin

Non-GAAP Net Income

$1.7M

24.0%

Non-GAAP Diluted EPS

$0.06

Q1 non-GAAP gross margin increased 78% or 1050 basis points year-over-year

Healthy gross margin was driven by strong performance in our base markets

See Appendix A for both GAAP and non-GAAP financial measures contained in this

presentation, together with a reconciliation of non-GAAP to GAAP measures.

Q108 and FY07 Operating Metrics

360

364

367

378

$1.3m

$1.1m

$0.97m

$170.1m

$180.6m

$178.8m

$198.1m

$0.18

4.8%

5.9%

21.7%

$111.7m

$0.09

3.0%

2.3%

19.2%

$87.2m

$0.02

0.7%

–1.2%

17.5%

$82.2m

126

$(0.13)

–5.0%

–11.0%

13.5%

$72.0m

FY07-Q1

Metric

FY07-Q2

FY07-Q3

FY07-Q4

Revenue

Non-GAAP Gross margin

Non-GAAP Op. margin

Non-GAAP Net margin

Non-GAAP EPS

DSO (days)

CCC (days)

Cash, investments

# of employees

Revenue per

employee –

Regular

See Appendix A for both GAAP and non-GAAP financial measures contained in this

presentation, together with a reconciliation of non-GAAP to GAAP measures.

348

$0.8m

$206.9m

$0.06

2.5%

1.2%

24.0%

$68.0m

FY08-Q1

Financial Flexibility

Strong Balance Sheet -

No Debt

As of March 29, 2008

Debt

None

DSO

47 days

Balance sheet affords company flexibility to invest in high-growth

opportunities and potential acquisitions

Cash, short term and long term investments increased $36.8 million or

22% year-over-year

Q107

Q207

Q307

Q407

$170.1

$180.6

$178.8

$198.1

Q108

$206.9

Cash & Investments

$160

$170

$180

$190

$200

$210

Cash, ST & LT

Investments

$206.9M

FY08 Financial Projections

As of April 24, 2008

Revenue (in millions)

$353 –

374M

Non-GAAP Gross Margin

18.0-21.0%

Non-GAAP EPS

Positive

GAAP Gross Margin

17.6 -

20.6%

See Appendix A for both GAAP and non-GAAP financial measures contained in this

presentation, together with a reconciliation of non-GAAP to GAAP measures.

Rackable’s

Strong Leadership

and Oversight:

The right team and the

right policies are in place

tailored for our company and needs

Strong Corporate Governance

Board has

the extensive and

relevant industry expertise, contacts

and specialized experience required to

help achieve growth

of our

business

All directors (other than CEO) are independent under NASDAQ

criteria

Audit, Compensation, and Nominating and Corporate Governance

committees

comprised solely of independent directors

Each Audit committee member is an "audit committee financial

expert" under

applicable SEC rules

No Board member serves

as a director for

more than

three

other

public companies

Implemented minimum

stock ownership

guidelines for directors and

executive officers

Increased our corporate governance rating under the ISS Corporate

Governance Quotient system to better than 88.8% of Russell 3000

companies and 88.6% of Technology, Hardware & Equipment

companies.

Esteemed Board Members –

Qualified, Experienced, Dedicated

Mark Barrenechea –

President and CEO

Director since November 2006

20-year technology industry veteran

Served as Executive Vice President and CTO for

Computer Associates

Served as Senior Vice President of Applications

Development at Oracle, managing a multi-thousand

person global team

Ronald D. Verdoorn

–

Chairman

Director since March 2005

Served as Executive Vice President of Global

Operations for Affymetrix

Served as Executive Vice President and Chief

Operating Officer of Storage Products at Seagate

Former Director of Marvell Technology Group

Charles M. Boesenberg

Director since August 2006

Served as CEO and Chairman of the Board of NetIQ

Corporation,

Served as President and CEO of Integrated Systems

Served as CEO and Chairman of Central Point

Software

Served as President of MIPS Computer Systems,

Served as Senior Vice President at Apple Computer

Director of Callidus

Software, Interwoven, and

Keynote Systems

Gary A. Griffiths

Director since November 2004

Served as President of WebEx

Products and

Operations

Served formerly as Chairman, President and Chief

Executive Officer at Everdream

General Michael W. Hagee

Director since February 2008

Served as Member of the Joint Chiefs of Staff as

the 33rd Commandant of the United States Marine

Corps; 43 years total in the military

Decorations include Bronze Star with Valor, National

Intelligence Distinguished Service Medal, and

Defense Distinguished Service Medal.

Douglas R. King

Director since February 2008

Certified Public Accountant with more than 30 years

of experience in the accounting industry.

Managing Partner of the San Francisco office of

Ernst & Young LLP

Director of SJW Corp, Fuel Systems Solutions and

Adaptive Spectrum and Signal Alignment, Inc.

Hagi

Schwartz

Director since August 2004

Former Chief Financial Officer of Checkpoint,

HyperRoll, ATRICA, Noosh

Partner in Magnolia Capital Partners LTD

Rackable’s

Directors –

Qualified, Experienced, Dedicated

Mr.

Verdoorn

has

extensive

experience

Rackable

Systems’

markets

and

tremendous technology experience.

–

Served as Executive Vice President and Chief Operating Officer for Seagate for

over 13 years.

–

Former Director of Marvell Technology Group (MRVL)

–

Enables our Chairman to provide the required insight to help form our strategy,

make key decisions, and help attract the best talent for RACK

Mr.

Boesenberg

technology

industry

veteran

whose

extensive

experience

includes serving as a Chief Executive Officer for three major publicly-traded

companies in the IT industry.

–

Chairman of Compensation Committee and is serving or has served as

compensation

committee

chairman

compensation

committee

member

multiple other public companies.

–

Director of Callidus

Software (CALD), Interwoven (IWOV) and Keynote Systems

(KEYN)

–

Deep experience and fresh perspective have contributed significantly to our

ability to recruit and retain top talent and strengthen our compensation

practices.

Leza

is trying to replace experience with inexperience

THE CHOICE IS CLEAR

Proposed Candidates

Do Not Merit Board Seats

Lack relevant qualifications or experience in Rackable

Systems' industry or

with its current or potential

customers

Lacking business plan or vision to benefit the Company

and shareholders

Seeking disproportionate representation on Rackable’s

Board relative to its ownership position [0.01%]

Dissidents have nothing to add…..our two Directors have

extensive experience, expertise and dedication

THE CHOICE IS CLEAR

Say-on-Pay –

Not the Right Approach for Rackable

As a small to medium sized technology company,

adoption of the proposed advisory vote could put

Rackable Systems at a competitive disadvantage and

negatively impact stockholder value.

RACK already has established procedures by which our

stockholders can communicate directly with our Board.

RACK has transparent disclosure of our process and

procedures for determining executive compensation.

RACK already required to meet with 5% holders for

compensation input

Compensation Practices

Structure of compensation program

and policies is transparent

Compensation Committee comprised entirely of independent

directors

Experts hired to assist over the past 3 years

Target

provide

compensation

roughly

the

50th

percentile

peers

All of RACK corporate bonus plan is tied to performance targets

72% of currently employed NEO aggregate compensation in 2007

came from long-term equity incentive plans, tying their interests to

that of shareholders*

Exchange program was implemented in 2007 to preserve talent at a

critical time of transition when faced with significant retention

issues.

* Based on 2007 summary compensation table

from Rackable Systems’

Proxy statement

Summary

Current Board and new executive team are actively managing the

business and delivering results

–

Results and messages are resonating –

08 YTD RACK up ~20%,

NASDAQ down 6%

Rackable has 6 of 7 independent Directors, all of whom are

experienced and committed to delivering shareholder value

Leza

and nominee only own a total of 4,000 shares and lack

experience. Neither has any relevant experience to merit a position

on the Board

–

NO relevant senior experience, NO business plan

–

Seeking to displace two extremely valuable Board members, including

Chairman

–

Say-on-Pay proposal is not in the best interest of stockholders

Protect the value of your investment

Re-elect ALL of your Board members

Vote the WHITE proxy card today

APPENDIX

Reconciliation of GAAP to Non-GAAP

Financial Measures

Three Months Ended

(In thousands, except share and per share amounts)

March 31,

June 30,

September 29,

December 29,

March 29,

(Unaudited)

2007

2008

GAAP GROSS PROFIT

9,024

(6,934)

18,851

28,030

15,990

Add back (deduct):

Stock-based compensation

669

734

455

285

302

Excess and obsolete inventory charges associated with next-generation technology

shifts and related (recoveries) of these written-down inventories

20,589

(2,562)

(4,129)

Non-GAAP GROSS PROFIT

9,693

14,389

16,744

24,186

16,292

GAAP GROSS MARGIN

12.5%

-8.4%

21.6%

25.1%

23.5%

Add back (deduct):

1.0%

25.9%

-2.4%

-3.4%

0.5%

Non-GAAP GROSS MARGIN

13.5%

17.5%

19.2%

21.7%

24.0%

GAAP INCOME (LOSS) FROM OPERATIONS

(17,874)

(31,042)

(2,689)

(19,973)

(4,736)

Add back (deduct):

Stock-based compensation

7,888

6,318

4,926

4,103

3,457

Excess and obsolete inventory charges associated with next-generation technology

shifts and related (recoveries) of these written-down inventories

20,589

(2,562)

(4,129)

Goodwill impairment

23,872

Severance costs associated with executive management departures

781

Amortization of intangible assets - Terrascale acquisition

376

699

1,133

843

Amortization of patents and customer list

359

321

Quarterly payout related to Terrascale acquisition

1,295

1,266

Non-GAAP INCOME (LOSS) FROM OPERATIONS

(7,956)

(1,001)

2,028

6,593

830

GAAP OPERATING MARGIN

-24.8%

-37.7%

-3.1%

-17.9%

-7.0%

Add back:

13.8%

36.5%

5.4%

23.8%

8.2%

Non-GAAP OPERATING MARGIN

-11.0%

-1.2%

2.3%

5.9%

1.2%

Reconciliation of GAAP to Non-GAAP

Financial Measures

Three Months Ended

(In thousands, except share and per share amounts)

March 31,

June 30,

September 29,

December 29,

March 29,

(Unaudited)

2007

2008

GAAP NET INCOME (LOSS)

(10,157)

(40,448)

(18,957)

(2,892)

Add back (deduct):

Stock-based compensation

7,888

6,318

4,926

4,103

3,457

Excess and obsolete inventory charges associated with next-generation technology

shifts and related (recoveries) of these written-down inventories

20,589

(2,562)

(4,129)

Goodwill impairment

23,872

Severance costs associated with executive management departures

781

Amortization of intangible assets - Terrascale acquisition

376

699

1,133

843

Amortization of patents and customer list

359

321

Quarterly payout related to Terrascale acquisition

1,295

1,266

Adjustment to tax provision/benefit (1)

(3,398)

11,020

(2,128)

(2,302)

(983)

Non-GAAP NET INCOME (LOSS)

(3,637)

613

2,594

5,307

1,691

GAAP NET MARGIN

-14.1%

-49.2%

0.0%

-17.0%

-4.3%

Add back:

9.1%

49.9%

3.0%

21.8%

6.8%

Non-GAAP NET MARGIN

-5.0%

0.7%

3.0%

4.8%

2.5%

GAAP NET INCOME (LOSS) PER SHARE - DILUTED

($0.36)

($1.42)

$0.00

($0.65)

($0.10)

Add back:

Stock-based compensation, excess and obsolete inventory charges associated with

next-generation technology shifts and related (recoveries) of these written-down

inventories, goodwill impairment, severance costs associated with executive

management departures, amortization of intangible assets - Terrascale acquisition,

amortization of patents and customer list, quarterly payout related to Terrascale

acquisition and adjustment to tax provision/benefit

$0.23

$1.44

$0.09

$0.83

$0.16

Non-GAAP NET INCOME (LOSS) PER SHARE - DILUTED

($0.13)

$0.02

$0.09

$0.18

$0.06

SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE

DILUTED - GAAP

28,220,970

28,564,459

29,317,375

29,233,217

29,352,438

DILUTED - Non-GAAP

28,220,970

29,127,784

29,317,375

29,468,908

29,452,640

(1) The provision of income taxes used in arriving at the non-GAAP net income was computed using an income tax rate of 40.9% for all fiscal quarters disclosed above and

includes a $13.2 million valuation charge for the year ended December 29, 2007.

The valuation allowance was recorded to adjust the realizability of deferred tax assets at the beginning of the year due to a projected pre-tax loss that will result in a cumulative

pre-tax loss position for fiscal years 2007, 2006, and 2005.

Reconciliation of GAAP to Non-GAAP

Financial Measures

As of April 24, 2008

Revenue and Gross Margin Projections

FY 2008

Low

High

Estimated revenues

353.2

374.4

Non-GAAP gross margin

18.0%

21.0%

Non-GAAP estimated gross profit

63.6

78.6

Less:

Estimated stock based compensation expense under cost of revenue

(1.6)

GAAP estimated gross profit

62.0

77.0

GAAP estimated gross margin

17.6%

20.6%

Percentage difference -

Non-GAAP and GAAP gross margin

0.4%

EPS Projection

FY 2008

Estimated GAAP loss per share

(0.38)

Estimated stock based compensation expense

0.43

Amortization of intangible assets -

Terrascale

acquisition

0.11

Quarterly payout related to Terrascale

acquisition

0.08

Estimated tax impact of non-GAAP adjustments and to reconcile GAAP

to non-GAAP tax rate

(0.07)

Estimated non-GAAP earnings per diluted share (1)

0.17

Estimated number of diluted shares (in millions)

30.2

Footnote:

(1) For reconciliation purpose only, the Company has estimated 2008 non-GAAP EPS of $0.17 or flat year over year.

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