SGI Somnigroup International Inc

SGI Reports Third Quarter Financial Results MOUNTAIN VIEW, Calif., April 19 /PRNewswire-FirstCall/ -- Silicon Graphics (NYSE:SGI) today announced results for its third fiscal quarter which ended March 25, 2005. Revenue for the third quarter was $159 million, in line with the preliminary results announced April 7, 2005. Gross margin was 34.5% compared with 37.5% in the second quarter. SGI's third-quarter operating loss was $45 million, compared with an operating loss of $9 million in the second quarter. The third-quarter net loss was $45 million or $0.17 per share, compared with a net loss of $11 million or $0.04 per share in the second quarter. GAAP operating expenses for the third fiscal quarter were $99.7 million compared with $92.9 million last quarter. Non-GAAP operating expenses were $85.4 million in the third quarter compared with $87.7 million last quarter excluding restructuring charges of $14.3 million and $5.2 million, respectively. 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. "As we previously announced, our Q3 results were far short of our initial expectations," said Bob Bishop, chairman and CEO of Silicon Graphics. "Several major server and storage orders failed to close at the end of the quarter and we continue to see significant competitive pressure in the marketplace, which affects our margins as well as our revenue. Nevertheless, continued recognition of our Altix server line and the early adoption of our Linux-based Silicon Graphics Prism visualization system give us confidence that we are on the right track with the new product lines." Unrestricted cash, cash equivalents and marketable investments on March 25, 2005 were $84 million as compared with $106 million at the end of the second quarter of fiscal 2005. As previously announced, after the close of the quarter, SGI also renewed its asset-based line of credit with Wells Fargo Foothill, Inc. and completed the sale of a portion of its interest in SGI Japan for $29 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 913-981-4901 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: 4007592) or 719-457-0820 (passcode: 4007592) 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 cash flows; and failure to maintain adequate cash resources for the operation of the business. 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 December 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/. NOTE: Silicon Graphics, SGI, the SGI logo and Altix 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 CONTACT 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 Nine Months Ended Ended Mar. 25, Mar. 26, Mar. 25, Mar. 26, 2005 2004(1) 2005 2004(1) (unaudited) (unaudited) Product and other revenue $78,788 $117,166 $288,379 $353,246 Product revenue from related party(2) 6,527 6,158 40,201 21,486 Service revenue 73,925 89,241 229,169 259,575 Total revenue 159,240 212,565 557,749 634,307 Costs and expenses: Cost of product and other revenue 58,992 68,909 214,557 216,269 Cost of service revenue 45,291 54,194 141,561 152,294 Research and development 24,342 26,733 72,471 85,480 Selling, general and administrative 61,025 62,598 186,612 192,086 Other operating expense(3) 14,294 8,643 22,659 45,866 Total costs and expenses 203,944 221,077 637,860 691,995 Operating loss (44,704) (8,512) (80,111) (57,688) Interest expense (3,706) (3,832) (12,698) (15,904) Interest and other income (expense), net 2,345 4,414 2,211 (25,845) Loss from continuing operations before income taxes (46,065) (7,930) (90,598) (99,437) Income tax benefit (1,564) (2,707) (7,019) (6,749) Net loss from continuing operations (44,501) (5,223) (83,579) (92,688) Discontinued operations: Net income (loss) from discontinued operations, net of tax -- 1,132 (276) 3,300 Net loss $(44,501) $(4,091) $(83,855) $(89,388) Net (loss) income per common share - basic and diluted: Continuing operations $(0.17) $(0.02) $(0.32) $(0.43) Discontinued operations -- 0.00 (0.00) 0.02 Net (loss) income per common share - basic and diluted $(0.17) $(0.02) $(0.32) $(0.41) Shares used in the calculation of net (loss) income per common share - basic and diluted 264,043 229,743 262,856 216,782 (1) The results of our Alias application software business for periods prior to its sale in June 2004, are reflected as discontinued operations. (2) Represents product sales to SGI Japan, a related party for which we own a 40% equity interest at March 25, 2005 and March 26, 2004. (3) Represents charges for estimated restructuring costs and charges associated with the impairment of assets. SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 25, June 25, 2005 2004 ASSETS (unaudited) Current assets: Cash and cash equivalents $83,475 $154,855 Short-term marketable investments 100 2,010 Short-term restricted investments 31,751 23,585 Accounts receivable, net 88,483 113,901 Inventories 92,865 66,938 Prepaid expenses and other current assets 37,642 34,916 Total current assets 334,316 396,205 Restricted investments 413 909 Net property and equipment 59,156 74,595 Other assets 89,034 98,215 $482,919 $569,924 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $78,266 $65,119 Accrued compensation 33,737 37,053 Income taxes payable 2,802 6,082 Other current liabilities 87,811 98,467 Current portion of long-term debt 1,571 17,775 Current portion of deferred revenue 92,738 96,058 Total current liabilities 296,925 320,554 Long-term debt 261,785 264,212 Long-term deferred revenue 41,156 25,749 Other liabilities 85,797 82,087 Total liabilities 685,663 692,602 Total stockholders' deficit (202,744) (122,678) $482,919 $569,924 DATASOURCE: SGI CONTACT: media, Caroline Japic, +1-650-933-7210, or , or investors, Beth Howe, +1-650-933-8279, or , or SGI PR HOTLINE, +1-650-933-7777, or SGI PR FACSIMILE, +1-650-933-0283, all of Silicon Graphics, Inc. Web site: http://www.sgi.com/

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