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October 27, 1997updated 03 Sep 2016 8:59pm

SGI TO REORGANIZE AFTER Q1 LOSSES

By CBR Staff Writer

Silicon Graphics Inc’s shed a further 12% of their value to close down $2.125 at $15.25 following a combination of yesterday’s bloodbath on the stock market and the reporting of an anticipated $56m loss compared with a $22m deficit last time, on revenue down 0.4% at $620.6m compared with $623.4m. The loss includes a $17m charge for the acquisition of Paragraph International and merger expenses of $2m. SGI shares have lost half of their value since reaching a 52-week high last month. CEO Ed McCracken blamed the poor US sales of its servers and weak marketing, suggesting a cull of top sales executives is on the cards. SGI said a proposed reorganisation plan would be discussed by the board on Wednesday. Operating losses jumped from $28.3m to $66.8m on the year-ago period. The Wall Street Journal was expecting SGI to slash as many as 500 jobs on the back of the news; other reports speculated SGI was up for sale. The company declined to comment. Merill Lynch analyst Steve Milunovich thinks a new advertising campaign SGI launched yesterday in the Wall Street Journal highlighting the throughput of its Origin server as a solution for strategic computing problems is a good one since SGI’s ccNUMA architecture is superior to others in this regard, he believes. However positioning itself as a strategic solution partner a la Sun, HP and IBM rather than as the hot box company it said it would market itself as just a couple of quarters ago is a mistake because SGI has no mindshare in strategic computing; IBM, HP, or even Sun and DEC do. The answer, in our view, is to take the bandwidth idea further and create a server subcategory called wideband servers. Then link that to the overall focus of high performance computing. The company’s also got an opportunity to leverage this experience in the Windows NT space, especially visual computing.

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