Friday 12 May 2006 - 10:34
High-end workstatiion vendor Silicon Graphics has filed for Chapter 11 bankruptcy protection in the US as it continues recent efforts to revamp itself and regain profitability. In an announcement, the company also said it has reached an agreement with major lenders to reduce its debt by approximately $250 million (£135 million) as part of the restructuring.
SGI's IRIX-based workstations have been a mainstay of feature film and commercial post production since digital special effects were first invented, but have been usurped by much less expensive mass-market models running Windows, Linux or Mac OS X. The final blow to the company's position in the post production market came with the announcement of a Linux-based version of Autodesk's flagship visual effects system, Discreet Inferno. Similar trends in server market have also hit the company hard.
SGI also released preliminary third-quarter financial results, reporting revenue of $108 million for the three months that ended March 31. That compares to revenue of $144 million in the previous quarter and $159 million in the same quarter a year earlier. On a Generally Accepted Accounting Basis, SGI's net loss for the quarter was $43 million, or $0.16 per share, compared to a net loss of $45 million, or $0.17 per share, in the same quarter in 2005, according to the preliminary figures.
SGI said its non-U.S. subsidiaries, including those in Europe, Canada, Mexico, South America and in the Asia-Pacific region, are not included in the bankruptcy filing and will not be subject to the requirements of Chapter 11. SGI said it plans to emerge from bankruptcy within six months.
"We want to assure our customers, our employees and our communities that SGI is operating, business as usual," SGI Chairman and CEO Dennis McKenna said in a statement. "Our customers can continue to rely on SGI for its mission-critical products, services and support."
McKenna became CEO, president and chairman of the board of SGI in late January, when he succeeded Robert Bishop, who remains on the board of directors. McKenna was formerly the CEO of privately-held SCP Global Technologies Inc. in Boise, Idaho.
Since beginning its reorganization earlier this year, SGI said it has completed a program that will save $50 million in the short term and another $100 million annually over the long term. The company also said that it has improved the efficiency of its manufacturing operations and has expanded its product road map.
Todd R Weiss
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