Super Micro’s Survival Hangs in the Balance
The past few months have been a perfect storm of trouble for Super Micro Computer Inc (NASDAQ:SMCI). A scathing short seller report, delayed financial filings, and the looming threat of delisting have all taken their toll on the company. And if that wasn’t enough, last week’s auditor resignation has left investors reeling.
Inventory Woes Weigh Heavily
At the heart of Super Micro’s problems lies its bloated inventory, which has surged to a staggering $4.4 billion. This massive increase has put a significant strain on the company’s margins, profitability, and cash flow. According to Lynx Equity Strategies analyst KC Rajkumar, the high cost of liquid-cooled kits for H100/H200 has been a major contributor to this problem.
Cash Flow Crisis
The impact on Super Micro’s cash flow has been devastating. In FY2024, the company reported a negative cash flow from operations of $2.5 billion, a far cry from the positive $663 million it saw just a year ago. Despite raising a combined $3.35 billion through a convertible issue and secondary offering, Super Micro still finds itself in a precarious financial position.
A Difficult Decision Ahead
To ensure its long-term survival, Rajkumar believes Super Micro may have no choice but to remove the expensive NVIDIA Blackwell program from its shipment pipeline. This move would likely involve lowering FY2024 revenue guidance, a bitter pill to swallow for investors. However, it could also lead to an improvement in gross margin in the second half of the year, which could be a silver lining for the company’s stock.
Accounting Woes and Auditor Resignation
The exact reasons behind the auditor’s resignation remain unclear, but Rajkumar suspects that management’s response to the sudden changes in cash flow and balance sheet items may have played a role. Whatever the cause, one thing is certain: Super Micro faces significant challenges in the days ahead.
A Path Forward
To stabilize its finances, Super Micro may need to scale back its Blackwell goals and focus on the H100 market. This would require a significant adjustment, but it could ultimately ensure the company’s long-term stability. Investors will be watching closely as Super Micro provides its first-quarter 2025 business update later today, hoping to glean more insight into the company’s plans to address its current woes.
Leave a Reply