Workstation giant, Silicon Graphics Inc stunned the market yesterday by announcing that it had lost five times what analysts had predicted in a very disappointing first quarter. Mountain View, California-based SGI reported a net operating loss, excluding restructuring costs and one-time charges, of $68m, or 37 cents a share. Analysts polled by First Call had […]
Workstation giant, Silicon Graphics Inc stunned the market yesterday by announcing that it had lost five times what analysts had predicted in a very disappointing first quarter. Mountain View, California-based SGI reported a net operating loss, excluding restructuring costs and one-time charges, of $68m, or 37 cents a share. Analysts polled by First Call had been expecting the firm to turn in a 7 cents-per-share loss.
In addition, the firm said it had been hit with a $145m one-off bill from cutting 1,100 jobs, and had incurred an $86m charge from writing off stockpiles of its 320 and 540 Windows NT-based Visual Workstation product lines. Including these costs, net losses for the three months to September 30 mounted to $213m or $1.17 a share, compared to a net loss of $44m or 24 cents a share in the corresponding period last year. Revenue was down 5% on the year-ago at $585m.
The firm said customers had deferred orders in the wake of former CEO Rick Belluzzo’s abrupt departure to become group vice president of Microsoft Corp’s Consumer and Commerce Group mid-way through the quarter. Sales of Windows NT-based workstations and supercomputers, inherited from its acquisition of Cray Research, significantly missed expectations said chief financial officer, Steven Gomo. Shipments of high-end graphic workstations and Origin servers also fell short of projections.
The results set back SGI’s target to return to the black by one full quarter. It does not now expect to break even until the third quarter ending March 2000, executives said, when revenue is projected to increase marginally to $600m. At the end of August, following Belluzzo’s resignation, chairman and chief executive officer, Robert Bishop predicted the firm would achieve break- even by the December quarter. Bishop said the immediate priority is to stabilize the situation by rebuilding customer confidence damaged by Belluzzo’s departure and scotching negative propaganda being spread by competitors.
SGI, which is finding its workstation market increasingly encroached upon by high-specification, cheaper, PCs, is in the throes of recasting itself as a high-end server company. But it has found it tough to dispose of stray units, including its poorly-performing supercomputer business, formed from the acquisition of Cray Computer. Executives said yesterday that the firm continues to be in talks with possible suitors for the unit but is still without a deal.
Under what executives called the August 10 plan approved by Belluzzo before his departure, SGI is also pursuing the twin grail of focusing the company on high-growth markets and exploiting cross-industry partnerships. Bishop said the firm would go after business in a slew of business segments which he said offered compound growth above 30% a year, including streaming media, under which it is said to be planning to spin off its in-house operation. á