SGI Somnigroup International Inc

SGI Reports Second Quarter Financial Results MOUNTAIN VIEW, Calif., Jan. 25 /PRNewswire-FirstCall/ -- Silicon Graphics (NYSE:SGI) today announced results for its second fiscal quarter, which ended December 24, 2004. Revenue for the quarter was $223 million, compared with $175 million for the first quarter ended September 24, 2004. Gross margin was 37.5% in the second quarter, up from 35.9% in the first quarter. SGI's second-quarter operating loss from continuing operations was $9 million, compared with an operating loss of $26 million in the first quarter. The second-quarter net loss from continuing operations was $11 million or $0.04 per share, compared with a net loss of $28 million or $0.11 per share last quarter. GAAP operating expenses for the second quarter were $93 million, compared with $89 million for the first quarter. Non-GAAP operating expenses for the second quarter were $88 million, excluding $5 million recorded as other operating expense. This compares with prior quarter non-GAAP operating expenses of $86 million excluding $3 million in other operating expense. These other operating expenses consisted of primarily charges associated with facilities consolidation. Management believes that a non-GAAP presentation of operating expenses is useful to investors to facilitate period to period comparisons of SGI's operating results. "Altix revenues continue to build during the second quarter as we successfully installed the world's fastest production computer at NASA's Ames Research Center and the world's largest shared memory computer in Japan," said Bob Bishop, chairman and CEO of SGI. "Furthermore, Silicon Graphics Prism has been successfully launched into the visualization market. Nevertheless, we continue to fall short of our profitability objectives and will take steps to lower expenses accordingly." Unrestricted cash, cash equivalents and marketable investments on December 24, 2004 were $106 million. SGI will conduct a conference call today at 2 p.m. PT to provide additional details. The webcast is available at http://www.sgi.com/company_info/investors/events.html . The dial-in number is (888) 208-1824 or (913) 981-5591 for participants outside of North America. An audio replay of this call will be available after 5 p.m. PT today at (888) 203-1112 (passcode: 213560) or (719) 457-0820 (passcode: 901189) and will be available for seven days. All links to the archived Webcast and audio replay are available through SGI's Web site at http://www.sgi.com/company_info/investors/. This news release contains forward-looking statements relating to future events or expected financial performance that involve risks and uncertainties. The company's future results could differ materially from the expectations discussed herein. Factors that might cause such a difference include risks associated with the timely development, production and acceptance of new products and services; increased competition; dependence on third party partners and suppliers; the failure to achieve expected product mix and revenue levels; failure to manage costs and generate improved operating results; and the ability to improve the financial condition and performance of the company. These and other risks are detailed from time to time in SGI's periodic reports that are filed with the Securities and Exchange Commission, including SGI's quarterly report on Form 10-Q for the quarter ended September 24, 2004. We undertake no obligation to publicly update or revise any forward- looking statements, whether changes occur as a result of new information, future events or otherwise. SILICON GRAPHICS | The Source of Innovation and Discovery(TM) SGI, also known as Silicon Graphics, Inc., is a leader in high-performance computing, visualization and storage. SGI's vision is to provide technology that enables the most significant scientific and creative breakthroughs of the 21st century. Whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, or enabling the transition from analog to digital broadcasting, SGI is dedicated to addressing the next class of challenges for scientific, engineering and creative users. With offices worldwide, the company is headquartered in Mountain View, Calif., and can be found on the Web at http://www.sgi.com/. Silicon Graphics, SGI, Altix, and the SGI logo are registered trademarks and The Source of Innovation and Discovery and Silicon Graphics Prism are trademarks of Silicon Graphics, Inc., in the United States and/or other countries worldwide. All other trademarks mentioned herein are the property of their respective owners. MEDIA CONTACT Caroline Japic 650.933.7210 INVESTOR RELATIONS Beth Howe 650.933.8279 SGI PR HOTLINE 650.933.7777 SGI PR FACSIMILE 650.933.0283 SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) Three Months Ended Six Months Ended Dec. 24, Dec. 26, Dec. 24, Dec. 26, 2004 2003(1) 2004 2003(1) (unaudited) (unaudited) Product and other revenue $117,456 $125,759 209,591 $236,080 Product revenue from related party(2) 27,823 7,534 33,674 15,328 Service revenue 77,823 86,233 155,244 170,334 Total revenue 223,102 219,526 398,509 421,742 Costs and expenses: Cost of product and other revenue 89,780 77,044 155,565 147,360 Cost of service revenue 49,578 47,350 96,270 98,100 Research and development 24,823 26,788 48,129 58,747 Selling, general and administrative 62,870 60,137 125,587 129,488 Other operating expense, net(3) 5,199 12,986 8,365 37,223 Total costs and expenses 232,250 224,305 433,916 470,918 Operating loss (9,148) (4,779) (35,407) (49,176) Interest expense (3,856) (5,182) (8,992) (12,072) Interest and other income (expense), net 132 (29,792) (134) (30,259) Loss from continuing operations before income taxes (12,872) (39,753) (44,533) (91,507) Income tax benefit (1,723) (1,013) (5,455) (4,042) Net loss from continuing operations (11,149) (38,740) (39,078) (87,465) Discontinued operations: Net income (loss) from discontinued operations, net of tax -- 1,372 (276) 2,168 Net loss $(11,149) $(37,368) (39,354) $(85,297) Net loss per common share - basic and diluted: Continuing operations $(0.04) $(0.18) (0.15) $(0.42) Discontinued operations -- 0.01 (0.00) 0.01 Net loss per common share - basic and diluted $(0.04) $(0.18) (0.15) $(0.41) Shares used in the calculation of net loss per common share - basic and diluted 262,487 211,034 262,263 210,302 (1) The results of our Alias application software business, which was sold in June 2004, are reflected as discontinued operations for all periods presented. (2) Represents product sales to SGI Japan, a related party for which we own a 40% equity interest. (3) Represents a net charge for estimated restructuring costs and charges associated with the impairment of assets. SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) December 24, June 25, 2004 2004 ASSETS (unaudited) Current assets: Cash and cash equivalents $105,491 $154,855 Short-term marketable investments 43 2,010 Short-term restricted investments 28,413 23,585 Accounts receivable, net 127,420 113,901 Inventories 73,066 66,938 Prepaid expenses and other current assets 33,168 34,916 Total current assets 367,601 396,205 Restricted investments 413 909 Net property and equipment 63,062 74,595 Other assets 90,933 98,215 $522,009 $569,924 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $76,853 $65,119 Accrued compensation 38,948 37,053 Income taxes payable 2,843 6,082 Other current liabilities 90,561 98,467 Current portion of long-term debt 5,805 17,775 Current portion of deferred revenue 87,286 96,058 Total current liabilities 302,296 320,554 Long-term debt 262,201 264,212 Long-term deferred revenue 41,564 25,749 Other liabilities 77,178 82,087 Total liabilities 683,239 692,602 Total stockholders' deficit (161,230) (122,678) $522,009 $569,924 DATASOURCE: Silicon Graphics CONTACT: MEDIA: Caroline Japic, +1-650-933-7210 or , or INVESTORS: Beth Howe, +1-650-933-8279 or , both of SGI; SGI PR HOTLINE, +1-650-933-7777; or SGI PR FACSIMILE, +1-650-933-0283 Web site: http://www.sgi.com/

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