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April 2, 2009

Bankrupt Silicon Graphics to be bought by Rackable

HPC vendor klled by mounting debt and poor profits

By CBR Staff Writer

High-performance computing supplier Silicon Graphics Inc is bankrupt and all of its subsidiaries are to be sold for just $25 million in cash to Rackable Systems, the data centre storage systems supplier.

The high-end graphics workstation supplier finally filed for Chapter 11 protection yesterday, claiming to be $526 million in debt with assets worth just $390. In its latest second quarter, the company produced numbers which showed a bigger than expected net loss of $49 million.

The sale to Rackable is conditional, Silicon Graphics CEO Robert Ewald explained in a letter to customers,  but is hoped to be an approach that “will give us the desired result in the shortest amount of time.”

The proposed deal has to be scrutinised and approved by the courts and Rackable will want assurances that it can buy the company without being held responsible for all of the liabilities. The process is expected to take no longer than 60 days.

In its heyday Silicon Graphics was a market leader in the supply of high performance technical and engineering computers. It systems proved to be hugely popular among Hollywood film-makers, scientific communities and government where they are used for animation, simulation and other compute-intense processes. 

It produces the Altix line of HPCs, Infinite Storage high-performance storage arrays and virtualisation products.

Rackable isn’t in the best of shape itself, having had a run of five consecutive quarterly losses. The company is best known for its Eco-Logical rack-mounted servers and storage systems.

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Former CA Inc and Oracle executive Mark Barrenechea, now president and CEO of Rackable Systems said, “This combination gives us the potential for significant operational synergies, a strong balance sheet, and positions the combined company for long-term growth and profitability.”

The companies reportedly plan to concentrate on built-to-order server clusters and development of new shared-memory technology.

Silicon Graphics filed for Chapter 11 protection back in 2006, but managed to come out of difficult times then and go on with its line of high performance compute engines.


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