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April 21, 1997updated 05 Sep 2016 12:55pm

CRAY BEGINS TO LOOK LIKE AN ACQUISITION TOO FAR FOR SGI

By CBR Staff Writer

Was Cray Research Inc Silicon Graphics Inc’s Tandy Corp? AST Research bought all Tandy’s computer manufacturing operations and almost immediately realized that it was an acquisition too far. The saga concluded only last week with its collapse into the arms of Samsung Electronics Co. The numbers are just not coming out right any more, and Silicon Graphics is still looking for the kind of hit records that made it such a star in the early 1990s. It doesn’t help that it is having to make sense of the Cray acquisition at the same time as it it embroiled in an end-to-end product transition, and it also faces growing encroachment by rival Unix vendors on its prized imaging and graphics markets, plus aggressive competitive pricing and nibbling from Windows NT workstation vendors. The company missed third quarter expectations by a mile, reporting net profit down 80% at $10.5m, on revenue up 15% at $909.3m. Earnings per share were just $0.06 where Wall Street fans had been looking for $0.27 according to First Call. The operating figure before one-time expenses was nine cents a share, and it was likely this that analysts were trying to call. Silicon Graphics said a big contributing factor to the disappointing quarter was a delay getting its high-margin, high-performance Octane workstation line to market. It only did eight days of Octane revenue ships in the quarter, shifting 1,150 units. Also Cray started eating into its backlog – which translates as Cray orders are beginning to tail off – which significantly hurt its overall orders. Nobody really has any faith in this company, one analyst told Reuter – Nobody has any expectations. McCracken offered little further explanation of the reasons behind the shortfall in the tersely-worded statement issued by the firm but he cited healthy server demand from industrial, commercial and governmental users.

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