Thursday, April 2, 2009

Silicon Graphics eulogy may be premature

From BusinessWeek:

There was a time when Silicon Graphics Corp. was the Apple Inc. of corporate computing. It received coverage out of all proportion to its size, certainly by BW. And for good reason: It involved larger-than-life characters such as Jim Clark, who went on to co-found Netscape. SGI was forever on the cutting edge of technology innovation, and pioneered use of powerful computing technology in the making of movies, game consoles and for early Web companies in the mid-1990s. And it was a lightning rod in the best sense, always a central player in the big debates roiling the computer industry (workstation vs minicomputer, Risc vs Cisc and UNIX vs Windows, come to mind).

[On April 1], the company was sold for a piddly $25 million to server-maker Rackable Systems. Given evaporating sales of its proprietary machines in recent years, it was weighed down with more than $500 million in debt.

More here. And the press release is here. Excerpts:

FREMONT, CA and SUNNYVALE, CA., April 1, 2009 — Rackable Systems, Inc. (NASDAQ:RACK), a leading provider of servers and storage products for medium to large-scale data centers, today announced its agreement to acquire substantially all the assets of Silicon Graphics, Inc. (SGI) (NASDAQ: SGIC) for approximately $25 million in cash, subject to adjustment in certain circumstances, plus the assumption of certain liabilities associated with the acquired assets.

The combined businesses will provide customers with market leading hardware and software technology within large-scale x86 cluster computing, HPC, Internet, Cloud Computing, large-scale data storage environments and visualization platforms across many verticals and geographies. This combination is also expected to result in a stronger global services organization; reaching commercial, government and scientific sectors on a worldwide basis.

Because of the debt assumption, the $25 million price is a bit misleading. I know of one company that was acquired for something like $1, but the new owners had to assume the company's debt; the company was subsequently quite successful and was sold for $160 million.

So I wouldn't arrange for Silicon Graphics' funeral service just yet.
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