Silicon Graphics Inc says itÆs now mid-way through its recovery process, and is on track for a return to profitability by the fourth quarter of this year. CEO and chief executive officer Rick Belluzzo said he was pleased with the progress we have made during my first year. Yesterday, the company posted a second quarter net loss of $20m, compared with a $31m loss last time, on revenues down 20% year-on-year to $685m from last yearÆs $851m. The figures were bolstered somewhat artificially by an $8m reduction in previously estimated restructuring costs. Earnings per share were $0.11, a six cents improvement on last year’s $0.17, though the net loss would have been $25m, or $0.14 without the restructuring cost adjustment. Nevertheless, Belluzzo said that SGI had now established its corporate focus and divested itself of non-core business, and despite the fall in revenues – the effect of which was offset somewhat by higher than expected profit margins due to currency fluctuations and favorable manufacturing conditions – he said he remained positive for the future. Revenues grew 11% sequentially, at the bottom end of the low-teens growth targeted by the company last quarter, but expenses were down, and the decline in Unix workstation sales began to abate. High-end graphics sales were the best for a year, server sales grew and growth in professional services – a new area for SGI – was strong and steady. High-end Origin server revenues came in short of expectations, but SGI says it remains committed to the high-end systems market. The company ended the quarter with a $366m order backlog, 70% of which it says it will ship this quarter. Its book to bill ratio, at 1.17, was the highest for two years. Next quarter, the company says that margins will decline from their unusually high rate of 42.3%, as sales of the new lower-priced NT product lines kick in. The 320 Visual Workstation begins shipping early next month, and is expected to ramp up faster than any product in SGIÆs history. Shipments of the higher-end 520 workstations won’t kick in until the fourth quarter. Revenues from the new machines should help offset what is traditionally a weak quarter for SGI, resulting in high single digit sequential revenue growth to revenues in the mid-$700s, said the company. Quarterly revenues will continue to grow both sequentially and year-on-year in the second half of 1999, reaching profitability in Q4. At the current share price, SGIÆs 85% stake in MIPS Technologies Inc is now worth over $1bn. It says itÆs in the best interests of stockholders for it to dispose of that stake, and will do so over the next 20 months until September 2000. SGI says it will reveal more of its plans for the server market and professional services at an analysts meeting next week.
