SiliconBeat

On the eve of a potentially contentious shareholder meeting, Rackable Systems said its management spotted an error in its previously published financial report for its fiscal 2008 second quarter, which “should no longer be relied on.” It turns out that after reviewing various account reconciliations, the company was less unprofitable than previously reported.

Rather than the 10 cent a share loss it had reported, the Fremont maker of servers and storage for large-scale data centers now expects to report a loss of between two and three cents a share. The revision will lift its gross margin figure from the 23.5 percent it first reported, to a figure “”in the range of approximately 25% to 26%.” Sales figures will not change.

The changes will be primarily on paper however, and won’t result in a bump up in the amount of cash and such stuff that it reported for the quarter. It expects to finish and file the restatements within the next several weeks.

The company is in the midst of a proxy battle led by investors Richard Leza and Steve Montoya who are running uninvited for election to its board of directors. The pair have also placed a shareholder proposal on the agenda of shareholders meeting tomorrow that is intended to give shareholder’s a yearly advisory vote on the compensation given to the company’s top executives.

The two dissident investors believe that stock-based compensation expense at the company has gotten out of whack compared with spending on R&D and meager if any operating profits, according to a filing with the SEC.

“Given the magnitude of compensation versus R&D, we wonder if the Company’s operating results would improve if as many resources were focused on R&D as are apparently being focused on compensation. In our opinion, there is something intuitively wrong with compensation that consistently appears to exceed any operating profits the company may be generating.”

Even if they fail, the pair have evidently convinced Rackable to say in its proxy published April 28, (after having received the dissident’s say-on-pay proposal) that the board’s compensation committee now intends to “invite its top 20 shareholders to a meeting in which they will have an opportunity to comment on executive compensation.”