George Skaff, VP of marketing, explained the surprise decision for his company to change its name from Rackable Systems to SGI after its acquisition of beleaguered Silicon Graphics’ assets out of administration.
Rackable bought SGI for $25m in cash in April this year. A month later as it completed the acquisition, Rackable announced that it is changing its own name to Silicon Graphics International Corp, or SGI.
[click continue reading for more]Speaking to me last week, Skaff said, “The SGI brand is very strong all over the world. It would have cost us a lot of money to remarket ourselves as Rackable Graphics or Silicon Systems.”“Silicon Graphics is viewed as an iconic brand. Everyone knows who they are and though some will also know they have been in trouble recently that’s as opposed to not knowing the brand at all,” he added.
SGI’s George Skaff.
Skaff said, “This is our first major acquisition. This is much bigger and more complementary than when we took the storage line from Terrascale.”
Rackable bought Terrascale in April 2007, but things didn’t exactly go to plan – in August last year Rackable announced it was selling the RapidScale product line it garnered from Terrascale, after disappointing forecasts for RapidScale sales. Rackable shortly thereafter announced a partnership with NetApp to replace the RapidScale capabilities.
Announcing that deal, Rackable said, “Under terms of the agreement, Rackable Systems is joining NetApp’s Embedded Systems Vendor Program and will integrate NetApp storage into [our]… Eco-Logical data centre server and infrastructure offerings.”
But Skaff said the SGI acquisition is not comparable with its botched Terrascale buy: “The services side [of SGI], geographic coverage and portfolio made this a great buy for Rackable,” he said.
Asked about the fact that analysts point out that most technology acquisitions fail, Skaff said: “It’s certainly easy to say that most acquisitions fail but some get the integration done very effectively.”
“I can’t tell you with 100% certainty that it will work but we have confidence that the executive team — for instance our CEO was at CA and did many acquisitions, day in and day out — as well as using advisors who have done it before and made it work, gives us confidence we will get it right,” he said.
As for the competition to the new SGI, Skaff said, “We are more of a threat to Dell now thanks to our size and global presence and offering. We are becoming a large company with a large service portfolio.”
“With Sun out of the picture,” he said, with reference to the fact that Sun has been bought by Oracle, “and since it is yet to be determined if the Sun product will survive or not — margins are quite different [between Oracle’s software business and the Sun hardware business] – we have a great opportunity.”
“We think by 2010 we can be making $500m, that’s the guidance. Our mission remains to solve companies’ most demanding IT infrastructure challenges,” Skaff said.
In its first quarter ending April 9, Rackable announced sales of $44.4m, up from $38.8m in the year-ago period.
GAAP net loss per share from continuing operations was ($0.46) for the first quarter of 2009, compared to GAAP net loss per share of ($0.61) for the fourth quarter of 2008 and GAAP net income per share of $0.09 in the first quarter of 2008.
Non-GAAP net loss per share from continuing operations was ($0.24) in the first quarter of 2009, compared to non-GAAP net loss per share of ($0.17) for the fourth quarter of 2008 and non-GAAP net income per share of $0.12 in the first quarter of 2008.
“I am pleased with our revenue and working capital progress quarter over quarter, but I am not satisfied with the overall results,” said Mark J. Barrenechea, president and CEO of Rackable Systems (now SGI) at the time of the results announcement. “Although the economic turmoil will remain a challenge in 2009, we are focused on accelerating innovative products to market, controlling expenses and completing the acquisition of Silicon Graphics’ assets, enabling us to achieve better gross margins and customer diversification.”
Rackable Systems ended the first quarter of 2009 with $181.2m in cash, cash equivalents, long-term and short-term investments, compared to $180.6m at the end of the year-ago quarter.
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