Server and workstation vendor Silicon Graphics Inc has warned that it may have to seek protection under the bankruptcy laws if it has a significant shortfall on the latest restructuring plan or fails to find someone to buy the company or make a significant investment in it.
In November, it was suspended from trading on the New York stock exchange, and in January Nasdaq struck it off. A former hardware giant, SGI is now traded on the over-the-counter market and its stock price of $0.345 gives it a market value of $92.6m.
Mountain View, California-based SGI has a long history of failure. It recorded record revenue of $3.66bn in 1997 and has been going downhill ever since. The company last recorded a profit in 1997 when it made $125.7m, but since then, not even the dot-com boom could rescue the company as it made continued losses and sales continued to drop.
Its latest quarterly figures show that the decline is accelerating. The net loss rose from $11.2m to $30.5m while revenue declined 35% to $144.4m. With cash and equivalents at only $66m, the company is running out of money.
SGI’s legacy business is based on high-performance servers and visualization systems based on MIPS RISC processors and the IRIX operating system, a concept many in the industry would expect to find in a computer museum. SGI’s other product line is its core systems, based on Intel Itanium processors and the Linux operating system. But while many customers want Linux, they don’t necessarily want Itanium and the processor’s failure to take off has hurt SGI’s prospects.
Productivity is falling too. At its peak in 1997, SGI 10,930-strong workforce each generated $335,096 in revenue. In its 2005 financial year, the 2,439 staff each generated $300,026 in revenue.
By now, there will be far fewer on the payroll. Each year, SGI has a restructuring plan, which sees it shed staff and premises. So far, under the 2006 restructuring plan, 217 jobs have been eliminated and more will follow.
When the company revealed its second-quarter figures, SGI said Dennis McKenna was to take over as CEO. The company boasted that he was a proven leader, with an established track record of driving positive results in difficult business environments. These are all abilities that will be tested to the limit.