SGI closes painful 2005 with a thud

Massive restructuring underway

SGI warned that fourth quarter revenue would come in well below expectations and today revealed the accuracy of this forecast.

The hardware maker posted revenue of $172m. Earlier this month, it told investors to expect revenue between $170m and $175m - a range well down from an earlier forecast of revenue up to $200m. SGI has initiated a major restructuring plan and looks to announce the details of its scheme sometime during the current quarter.

"Our fourth quarter showed sequential revenue and bookings growth, and the lowest operating expenses for the fiscal year," said SGI CEO Bob Bishop. "Nevertheless, we need to accelerate the turnaround and strengthen our financial position going forward."

SGI has delivered a confusing message to investors, blaming the fourth quarter miss on a failure to close two, large deals, while at the same revealing that larger structural problems may actually be responsible for the poor performance. It has bought the services of a turnaround specialist Alix Partners to help with reducing expenses, boosting revenue and dealing with debt.

In the fourth quarter, SGI reported a loss of $16.4m, which compares to a loss of $7.5m one year earlier.

For the full fiscal year, SGI brought in $730m and showed a net loss of $76m. Those figures compare with revenue of $842m and a loss of $100m last year.

SGI has struggled to revive its hardware business despite trying to expand beyond its line of MIPS-based Irix servers. It has promoted systems with Intel's Itanium processor running Linux and secured some nice wins with this pairing. Of recent note, NASA used a massive SGI system for extensive work launching the Discovery shuttle. The sales, however, of large Itanic systems have not rolled in at a high enough pace to boost revenue on a major scale.

Shares of SGI barely moved in the after-hours markets, sitting at $0.72 per share at the time of this report. ®

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