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April 10, 2005

SGI shares slump as it warns on sales

SGI is bound to soon entice a buyer who can turn the company's technical excellence into commercial success after issuing a profits warning that has sent the company's share price down to a new low.

By CBR Staff Writer

It now expects that revenue for its third quarter to March 31 will be in approximately $160m, compared with its forecast in January of a figure in the range of $180m to $200m.

Even worse, it now expects an operating loss of approximately $45m, including a $15m charge for the restructuring operations that seem a quarterly event at the company.

With cash reserves expected to be down to $87m at the end of the quarter, SGI is raising $29m in cash by selling 16% of SGI Japan to a group of local investors. It retains a 24% interest in the company.

CEO Bob Bishop said that several large server and storage deals failed to close at the end of the quarter. The company was taking action to strengthen sales and marketing while continuing to reduce expenses.

The shares were down 13.01% to $0.99 on the news, valuing the company at just $260m. Given that SGI claims to have increased its server sales by 20% last year, at a time when the market as a whole increased by 6.2%, the company is bound to be a bid target as it seems incapable of making money.

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