Silicon Graphics Reports Second Quarter Fiscal Year 2009 Results

SUNNYVALE, Calif., Feb. 5  /PRNewswire-FirstCall/ -- Silicon Graphics, Inc. (NASDAQ:SGIC) today announced financial results for its second fiscal quarter ended December 26, 2008.

Revenue for the second quarter was $82.8 million, compared to $92.8 million in the previous quarter and $90.1 million in the second quarter of the prior year. The company's net loss for the quarter was $49.2 million, or $4.24 per share, versus a net loss of $33.7 million or $2.91 per share last quarter and $42.2 million or $3.78 per share in the second quarter of the prior year.

Excluding charges for restructuring and impairment of investments, earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter was a loss of $17.3 million, compared to a loss of $13.2 million for the previous quarter and a loss of $22.1 million in the second quarter of the prior year.

Pro forma revenue, a non-GAAP measure, for the second quarter was $89.3 million, compared to $117.5 million in the previous quarter and $109.1 million in the second quarter of the prior year. Pro forma revenue excludes the effect of Statement of Accounting Position 97-2, which requires the deferral of revenue in certain circumstances under software revenue recognition rules and is useful when considered in connection with revenue as calculated under GAAP.

Bookings for the second quarter were $68 million, compared to $58 million in the first quarter and $100 million in the second quarter of the prior year. Bookings are calculated as the sum of all committed purchase orders for products and professional services deliverable within 12 months.

The company achieved key milestones and furthered its product and operational strategy during the quarter:

-- NASA Ames Research Center in Mountain View, California launched the world's third fastest supercomputer, a SGI Altix ICE 8200EX system featuring 51,200-core Intel processors. This system was placed into operation much more quickly than other comparable systems.

-- Bookings increased about 17 percent compared to the first quarter and were strongest in the company's government business, particularly defense applications.

-- The company unveiled Silicon Graphics(R) VUE, a suite of software solutions that combine visual information from any source application or platform, fuse it into an intuitive 3D viewing experience, and securely deliver that experience anywhere in the world using any device.

-- Silicon Graphics won multiple awards at the major industry conference Supercomputing 2008, and at GEOINT, the company held the first public demonstrations of its new visualization software family.

"With our strong foundation of government customers and our long-term strategy, our leading products and services continue to gain traction in a difficult economic situation," said Silicon Graphics CEO Robert "Bo" Ewald. "We'll remain focused on our core strengths and strategy of helping customers solve large data, compute and visually intensive problems, while we work inside the company to improve our operations and financial footing."

"Given the economic environment, we are very focused on managing our expenses and working capital. We continue to implement the cost reduction measures we announced in December," said Silicon Graphics CFO Greg Wood. "The benefit of these measures should begin to be seen in the second half of our fiscal year as we take aggressive action to return to profitability."

"As we move into 2009, we have received very positive feedback from customers about our current and upcoming products, which include the recently announced VUE visualization tools and our ISLE software family," added Ewald. "Meanwhile, governments around the world are beginning to take actions that should increase investments in IT spending in core government R&D programs. Many of our existing customers should see additional budgets and we are hopeful that we can serve their increasing needs."

Conference Call

SGI will conduct a conference call today at 2:00 p.m. Pacific Standard Time (PST) to provide additional details. The Webcast is available at http://www.sgi.com/company_info/investors/webcast.html. The conference call can be accessed by dialing [phone] or [phone] for participants outside of North America, conference ID: 81349573. An audio replay of this call will be available after 5:00 p.m. PST today at [phone] or [phone] for individuals outside of North America, conference ID: 81349573 and will be available until February 12, 2009. After February 12, 2009, the call will be available as an archived Webcast. All links to the archived Webcast and audio replay will be available through the SGI Web site at http://www.sgi.com/company_info/investors/.

Silicon Graphics, Inc.

Silicon Graphics, Inc. (SGI) (NASDAQ:SGIC), is a leader in high- performance computing. SGI delivers a complete range of high-performance server and storage solutions along with industry-leading professional services and support that enable its customers to overcome the challenges of complex data-intensive workflows and accelerate breakthrough discoveries, innovation and information transformation. SGI solutions help customers solve their computing challenges whether it's enhancing the quality of life through drug research, designing and manufacturing safer and more efficient cars and airplanes, studying global climate, providing technologies for homeland security and defense, or helping enterprises manage large data. With offices worldwide, the company is headquartered in Sunnyvale, California, and can be found on the Web at http://www.sgi.com/.

Note: The main number for SGI corporate headquarters is 408-524-1980.

(C) 2009 SGI. All rights reserved. SGI, the SGI cube, Silicon Graphics VUE and the SGI logo are registered trademarks of SGI in the United States and/or other countries worldwide. All other trademarks mentioned herein are the property of their respective owners.

This press release contains forward-looking statements, including statements relating to expense controls, cash management and new products that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth herein, including the risks and uncertainties discussed under the caption "Risk Factors" and elsewhere in SGI's Form 10-K or Form 10-Q most recently filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. SGI disclaims any intent or obligation to update these forward- looking statements.

                          SILICON GRAPHICS, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (In thousands, except per share amounts, unaudited)

                                                Three Months Ended
                                          Dec. 26,    Sept. 26,   Dec. 28,
                                            2008        2008        2007

        Product and other revenue          $38,619     $44,531     $40,460
        Product revenue from related
         party (1)                           1,114         684       2,953
        Services revenue                    43,043      47,544      46,698
           Total revenue                    82,776      92,759      90,111

        Costs and expenses:
           Cost of product and other
            revenue                         32,308      34,849      34,938
           Cost of services revenue         28,606      28,664      27,310
           Research and development         14,297      15,096      14,464
           Selling, general and
            administrative                  35,065      36,862      44,163
           Restructuring expenses           10,734       3,809          20
               Total costs and expenses    121,010     119,280     120,895

        Operating loss                     (38,234)    (26,521)    (30,784)

        Interest expense                    (1,781)     (1,019)     (1,017)
        Interest expense from related
         parties                            (3,457)     (3,124)     (1,973)
        Interest and other income
         (expense), net                     (5,303)       (381)     (6,970)

        Loss before income taxes           (48,775)    (31,045)    (40,744)

        Income tax provision                   425       2,652       1,432

        Net loss                          $(49,200)   $(33,697)   $(42,176)

        Net loss per share:
          Basic                             $(4.24)     $(2.91)     $(3.78)

          Diluted                           $(4.24)     $(2.91)     $(3.78)

        Weighted-average shares used to
         compute net loss per share:
          Basic                             11,614      11,597      11,147
          Diluted                           11,614      11,597      11,147

        (1)  Represents product sales to SGI Japan, a related party of which
             we own a 10% interest



                          SILICON GRAPHICS, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)

                                             Dec. 26, 2008    Sept. 26, 2008
                                              (Unaudited)       (Unaudited)

    ASSETS
    Current assets:
       Cash and cash equivalents                 $34,995           $36,186
       Short-term marketable investments           1,098               179
       Short-term restricted investments           3,783             2,330
       Accounts receivable, net                   48,633            68,819
       Inventories                                49,546            51,370
       Prepaid expenses                            6,808             7,098
       Other current assets                       74,234            82,139
             Total current assets                219,097           248,121
    Restricted investments                         2,087             1,846
    Property and equipment, net                   33,296            36,363
    Other intangibles, net                        46,818            50,481
    Other non-current assets, net                 89,164            93,621

             Total assets                       $390,462          $430,432

    LIABILITIES AND STOCKHOLDERS' DEFICIT
    Current liabilities:
       Accounts payable                          $17,311           $31,917
       Accrued compensation                       22,339            25,737
       Income taxes payable                        2,161             3,549
       Other current liabilities                  45,648            44,260
       Current portion of long-term debt             ---            17,000
       Current portion of deferred revenue       171,040           163,819
             Total current liabilities           258,499           286,282

    Long-term debt                               157,378           116,407
    Non-current portion of deferred revenue       75,869            80,105
    Long-term income taxes payable                20,926            23,124
    Other non-current liabilities                 13,876            13,184
    Total liabilities                            526,548           519,102

    Total stockholders' deficit                 (136,086)          (88,670)
             Total liabilities and
              stockholders' deficit             $390,462          $430,432



EBITDA (excluding charges for restructuring and impairment of investments)

    Three Months Ended:                   26-Dec-08   26-Sep-08   28-Dec-07
                                                    (in thousands)
    Net Loss                              $(49,200)   $(33,697)   $(42,176)

       Interest expense                      5,238       4,144       2,990
       Income taxes                            425       2,652       1,432
       Depreciation and amortization         8,888       9,845       9,453
    EBITDA (1)                             (34,649)    (17,056)    (28,301)

       Restructuring charges                10,734       3,809          20
       Impairment charges                    6,573           -       6,149
    EBITDA, excluding charges for
     restructuring and impairment of
     investments (2) (3)                  $(17,342)   $(13,247)   $(22,132)



    Rider A

  (1)  The Company believes EBITDA is useful in understanding its financial
       performance as a supplement to net income/ (loss) and other
       performance measures calculated in conformity with accounting
       principles generally accepted in the United States ("GAAP").  The
       Company believes that EBITDA is useful to investors in evaluating its
       operating performance because it provides a measure of operating
       results unaffected by differences in capital structures, capital
       investment cycles and ages of related assets among otherwise
       comparable companies in the Company's industry.  EBITDA has
       limitations as an analytical tool, and should not be considered in
       isolation or as a substitute for any measure reported under GAAP.
       EBITDA's usefulness as a performance measure as compared to net
       income is limited by the fact that EBITDA excludes the impact of
       interest expense, depreciation and amortization expense and taxes.
       The Company borrows money in order to finance operations; therefore,
       interest expense is a necessary element of its costs and ability to
       generate revenue. Similarly, the Company's use of capital assets
       makes depreciation and amortization expense a necessary element of
       its costs and ability to generate income.  The Company believes
       EBITDA is useful to both management and investors as a measure of
       performance, but this measure should be viewed in conjunction with
       GAAP measures of performance, such as net income/(loss) and revenue.

  (2)  The Company believes EBITDA, excluding changes for restructuring and
       impairment of investments ("Adjusted EBITDA"), is useful to both
       management and investors in comparing its financial results across
       previous periods, particularly when viewed in connection with GAAP
       measures of performance, such as net income/(loss).

  (3)  In the quarters following emergence from bankruptcy beginning with
       the second fiscal quarter of 2007 and continuing to the first quarter
       of fiscal 2009, the Company reported an Adjusted EBITDA which
       excluded the impact of fresh start accounting under SOP 90-7, revenue
       deferrals under SOP 97-2, amortization of intangible assets,
       stock-based compensation under statement of financial accounting
       standard 123-R, non-cash items relating to the acquisition of Linux
       Networks, impairment of assets, gains or losses on foreign exchange
       and other income and expense. The previously reported Adjusted EBITDA
       was developed to facilitate a comparison of the Company's financial
       results to previous periods given significant non-operating charges
       following emergence from bankruptcy.  The Company believes that this
       measure served an important transition purpose and is now no longer
       necessary to facilitate understanding of the Company's financial
       statements. However, the Company will continue to supplement its
       disclosure with EBITDA, and Adjusted EBITDA measures (discussed in
       Notes 1 and 2).

   MEDIA CONTACT
   Marla Robinson
   
   256.773.2371

   SGI PR HOTLINE
   408-524- 2810


DATASOURCE: Silicon Graphics, Inc.



CONTACT:  Media, Marla Robinson of Silicon Graphics, Inc.,

[phone], , or SGI PR HOTLINE, [phone]



Web site:  http://www.sgi.com/ 

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