VNU Net: SGI turns in sharper Q3 losses

By John Geralds, VNU

Silicon Graphics (SGI) has reported worse than expected losses
for its fiscal third quarter results, blaming the delayed
introduction of new processors.

For the period ended 31 March, revenue slid nine per cent to
$564m. Net loss was $18.1m or 10 cents a share, compared with a
loss of $40m or 21 cents per share a year ago. Analysts polled by
First Call had expected a loss of seven cents per share.

Bob Bishop, chairman and chief executive officer, said revenue
for the quarter was disappointing, and claimed it was “largely
attributable to the delayed introduction of the R12000 400MHz
processors and the expectations of new products.”

He told analysts in a conference call that SGI would have
preferred more bookings and revenue, but “we took big steps to be a
leaner and more focused company.”

During the period the company reduced operating expenses by 17
per cent from last year, to $255m before restructuring costs. SGI
also expects to gain an extra $15m from the $58m sale of its Cray
supercomputer unit to Tera Computer. “We are on the way to
successful execution,” Bishop said.

SGI, well known for its work in visualisation and graphics, has
suffered several quarters of unprofitability and is in the middle
of a year long restructuring programme.

But the company promised it will begin introducing new
products in the next few months that will help “fuel long-term
growth and profitability.” Among the products include a third
generation ccNUMA architecture, new graphics subsystems for Onyx2
and Octane products, speed upgrades throughout the MIPS product
line and an IA32 desktop-server product running Linux.

Bishop said SGI’s primary goal is revenue growth and “we remain
optimistic about the future.”

But analysts believe that SGI is in a difficult position because
of its delayed products and competitors, including Hewlett Packard,
IBM and Sun Microsystems, are eager to steal away its business.

Sarang Ghatpande, an analyst with DH Brown Associates, said SGI
is having a harder time convincing software writers to stay with
the company.

Ghatpande said: “They’re not sure SGI will stay in the business
for the long run.”