Posted on 05/08/2006 11:10:30 AM PDT by nickcarraway
Graphical workstation maker Silicon Graphics (SGI) has filed for chapter 11 bankruptcy protection.
The move aims to reduce the company's debt by approximately $250m, SGI said in a statement. The company expects to emerge from its bankruptcy within six months.
The bankruptcy protection allows the company to focus on a corporate restructuring that it started earlier this year while keeping debt collectors at bay. The company warned in February that it risks running out of cash by the end of this year.
SGI specialises in high powered workstations with a strong focus on graphics applications. The company initially developed its own MIPS processors, but in the late nineties said that it would switch to Intel's Itanium processor.
Having tied its fate to the Intel chip, SGI was hit hard when the processor missed development deadlines and when initial models showed disappointing performance.
Advances in microprocessor and graphics processor designs meanwhile allowed the PC to catch up with specialised, high power work stations such as the ones marketed by SGI. The company's stock fell and in November 2005 was delisted from the New York Stock Exchange.
The bankruptcy filing is limited to the company and its US subsidiaries. Subsidiary companies in other regions including Europe, Canada and Asia won't be affected by the restructuring.
The workstation vendor emphasised that is expects to continue operating within any disruptions.
"We want to assure our customers, our employees and our communities that SGI is operating-business as usual," SGI chief executive Dennis McKenna said. "Our customers can continue to rely on SGI for its mission-critical products, services, and support."
ping
I used to love their gear but could not justify it with cheap Linux boxes appearing.
Trying to administer an IRIX box is like trying to drive a jet car with no steering wheel or brakes, and all the controls are labeled in Cantonese.
Damn! You had labels! Lucky!
Actually coming from Sun boxes and other Unix system I tought IRIX was pretty easy to admin. Plus the boxes were extremely fast. i was the webmaster for a large non-profit and the IT folks wanted me to give up an Indy and a Challenge X to migrate to Windows/IIS. I asked why I sould give up something faster, with better performance, and laready paid for -- and for once won a battle.
SGI Announces Pre-Negotiated Reorganization
MOUNTAIN VIEW, Calif., (May 8, 2006)—Silicon Graphics (OTC: SGID) today announced that it has reached an agreement with all of its Senior Secured bank lenders and with holders of a significant amount of its Senior Secured debt on the terms of a reorganization plan that will reduce its debt by approximately $250 million, greatly simplifying its capital structure.
As part of this agreement with many of its major stakeholders, and as the next step in its previously announced plan to reorganize its businesses, the Company and its U.S. subsidiaries have filed voluntary petitions under chapter 11 of the U.S. Bankruptcy Code. SGI's non-U.S. subsidiaries, including European, Canadian, Mexican, South American and Asia Pacific subsidiaries were not included in the filing; will continue their business operations without supervision from the U.S. courts; and will not be subject to the requirements of chapter 11. The Company expects to file its Plan of Reorganization reflecting the agreement shortly, and to emerge from Chapter 11 within six months.
"We want to assure our customers, our employees and our communities that SGI is operating-business as usual," Dennis P. McKenna, the recently appointed, Chairman and CEO of SGI, stated. "Our customers can continue to rely on SGI for its mission-critical products, services, and support." This reorganization is planned with no disruption to day-to-day customer and partner activities as the Company positions itself to recapture mindshare and market share. Over the last 100 days, the Company under the leadership of its new management team has had several significant achievements. During this time it has:
"This is a necessary and responsible step that will strengthen the Company and foster a sustained turnaround at SGI. This milestone marks a fundamental and comprehensive change," McKenna continued. "Our customers and partners want the Company to succeed because of the value SGI continues to bring to the disciplines and capabilities of discovery, innovation, engineering and information transformation which are at the center of the world's achievements and business processes."
"We expect to proceed quickly and will emerge from these proceedings with a significantly improved balance sheet and, as a result, greater operating flexibility. I am confident in SGI's future. The new direction I have set is comprehensive, the product portfolio we will unveil is expansive and our dedication to customer satisfaction is unwavering," McKenna added.
Certain holders of the Company's existing Senior Secured notes are providing SGI with a $70 million financing facility. The Senior Secured notes represent a majority of the Company's total outstanding debt. Subject to court approval, the proceeds from the financing together with cash generated from daily operations and cash on hand, will be used to paydown a portion of SGI's pre-petition debt and to fund operating expenses including post-petition supplier payments, employee wages and benefits, and other operating expenses.
The agreement contemplates that the Company's existing Senior Secured bondholders will be converting their existing debt into the new equity of SGI and, through a rights offering, will have the opportunity to purchase $50 million of additional new equity. The $50 million rights offering is being backstopped by certain of these bondholders to ensure that the Company raises the full $50 million of new equity capital. It is contemplated that the $50 million of new capital will be used to reduce debt and further enhance the Company's liquidity.
Upon confirmation of the plan, the new common stock of the Company will be issued to the holders of SGI's Senior Secured bonds in the manner described above. All of SGI's existing common stock and the unsecured subordinated debentures will be cancelled upon confirmation of the plan by the court and receive no recovery. Accordingly, the Company believes that SGI's currently outstanding common stock and unsecured subordinated debentures have no value.
McKenna concluded by stating "We regret the effect that this will have on SGI's shareholders and other unsecured creditors. SGI plays a critical role in the world's infrastructure. This needs to be preserved."
SGI's principal bankruptcy counsel is Weil, Gotshal & Manges LLP.
The filings were made today in the U.S. Bankruptcy Court for the Southern District of New York.
More information about SGI's reorganization is available on the Internet at www.sgi.com/reorg.
Forward-Looking Statements
This news release contains forward-looking statements relating to future events or expected financial performance that involve risks and uncertainties. Factors that might cause such a difference include, but are not limited to: the effects of our chapter 11 filing; our ability to maintain adequate liquidity; and our ability to obtain and maintain normal terms with customers, suppliers and service providers. These and other risks are or will be detailed from time to time in SGI's periodic reports that are filed with the Securities and Exchange Commission, including the Form 8K's filed today in conjunction with this announcement (and other announcements) and SGI's quarterly report on Form 10-Q for the quarter ended December 30, 2005. Silicon Graphics is under 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™
SGI, also known as Silicon Graphics, Inc. (OTC: SGID), is a leader in high-performance computing. SGI helps customers solve their computing challenges, whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense, enabling the transition from analog to digital broadcasting, or helping enterprises manage large data. With offices worldwide, the company is headquartered in Mountain View, Calif., and can be found on the Web at www.sgi.com.
Silicon Graphics, SGI, the SGI cube and the SGI logo are registered trademarks and The Source of Innovation and Discovery is a trademark 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.
Hitched itself to the SS Itanic and went down with it.
I thought Linux was supposed to save them. More like who or what will Linux kill next?
For the "low-end" market:
SGI was dying because of hardware, and Linux couldn't save them. Their MIPS processor was surpassed in performance by Intel and AMD, PCI-X and Hypertransport cut into their high-bandwidth bus advantage, and commercial graphics cards got good enough to kill their graphics advantage.
Maya getting ported to Windows, Mac and Linux on the now quite fast commodity hardware didn't help either.
Then SGI came out with Windows workstations, but Microsoft ceased supporting their hardware after Windows 2000. This flirting with Windows was a major financial loss and big part of their downfall (there you go, if you want some OS blame).
Then they decided to go with Intel's Itanium, which was like a drowning person asking to be rescued by the Titanic years before it even sailed.
It's too bad, because they made some sweet machines in the day. Their flat panel display is still in demand despite being several years old:
For the "high-end" market:
Their big iron is doing okay. Linux helped because current Linux apps can be run on their hardware, and they don't have to pour so much into IRIX anymore (in fact, the latest incremental updates to IRIX cost money).
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