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SGI loss deepens to $213 million

Ongoing restructure, failed sale of NT workstation line blamed

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SGI blamed its Q1 2000 loss of $68 million, announced yesterday, on a "temporary loss of momentum", but it's hard not to see it as a sign the company is grinding to a halt. The loss was five times worse than Wall Street had been expecting, and to make matters worse, that's before anyone took into account SGI's restructuring charges, which dragged the loss down to a staggering $213 million. This time last year, it lost $44 million. Revenues for the quarter reached $425 million, down slightly from the $475 million it recorded for the same period last year. CEO Robert Bishop put a brave face on the news, claiming that the company's restructuring is continuing apace and that "solid progress" has been made in the past few months. Possibly, but the outlook isn't too good. The restructuring charges incurred in the quarter included $86 million which SGI had hoped to make selling off its Windows NT workstation product line, but clearly no one was willing to pay the asking price. That doesn't bode too well for SGI's plan to sell of its Cray supercomputer division, announced, like the NT workstation sale, back in August by then CEO Rick Belluzzo. Soon afterwards, Belluzzo bailed out to go and work of Bill Gates, and we now wonder how seriously he considered staying with SGI. The company announced last month that it had found a partner to join with it in taking a stake in a spun-off Cray operation. That said, it has yet to say who the partner is, which suggests that both parties have yet to finalise terms. Given that's what it was saying about the NT workstation line not so long ago, confidence that it can pull off the Cray sale can't be high. At least it appears to be still selling computers -- it's revenue wasn't down too much -- so some money is coming into the company, though it will need to work very hard to increase sales, if it wants to pull out of its loss spiral. You can see the logic of focusing on high-margin Net servers here, but going right up against Sun, IBM, HP, et al and making a go of it is going to take some doing. ®

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