Niche server maker Rackable Systems said this morning that the U.S. bankruptcy court in New York handling the Chapter 11 proceedings for supercomputer maker Silicon Graphics has approved Rackable's acquisition of most of the assets of SGI.

Under the deal that was announced on April 1, the same day that SGI filed for bankruptcy protection, Rackable said it would be shelling out $25m to acquire most of the assets of SGI as well as assuming "certain liabilities" that were not specified. In the announcement today, that figure has risen to $42.5m in cash. The liabilities that Rackable is assuming have not been detailed.

Rackable had $171.9m in cash as its fiscal 2008 year ended on January 3 and can certainly afford to pay more money for SGI's assets. In mid-February, when it reported its full year 2008 results, with sales down 29.4 per cent to $247.4m and a net loss of $31.3m, the company said its board had allocated $40m to share buybacks and that it would allocated as much as $17m on additional R&D, sales, and marketing spending in fiscal 2009.

When the SGI deal was announced, the share repurchases were canceled and the company had buy SGI without hitting its cash pile too hard. This is a good way to acquire some very good technology and a fairly large customer base on the cheap.

Not that Rackable has it easy now. The company has cut its employee ranks twice in the past year as business for its dense, rack-based server products have plummeted in the face of the economic meltdown, from 378 down to 270. And it remains to be seen what people will make the jump from SGI to Rackable when this deal is completed on or around May 8. And SGI's own business has been on the rocks, with sales of $348.5m in the twelve months of calendar 2008 and losses of $157.8m.

Rackable reports its first quarter fiscal 2009 financial results on May 5 after the markets close and will discuss its plans for integrating Rackable and SGI technology and people at that time. ®

Related stories

• SGI chases Cray with baby cluster (6 August 2009)
• SGI renews Itanium super love (sort of) (27 July 2009)
• Rackable Systems slips into SGI's name (11 May 2009)
• Rackable serves up $13.4m in losses (5 May 2009)
• Comment SGI's Rackable's future supercomputers (1 April 2009)
• Silicon Graphics goes titsup (again) (1 April 2009)
• Rackable shrinks CloudRack cookie sheets (18 March 2009)
• Server market gets second opinion on Q4 (3 March 2009)
• SGI lays off another 9 per cent (3 March 2009)
• Rackable stomached $31.3m loss in 2008 (13 February 2009)
• SGI right at home in red ink (7 February 2009)
• Rackable gets physical with the virtual (22 January 2009)
• Rackable admits Q4 sales plummet (14 January 2009)
• Rackable servers goin' mobile (18 December 2008)
• Verari, Rackable look to leasing (15 December 2008)
• SGI slashes 15 per cent of its workforce (15 December 2008)
• SGI shows off Molecule concept machine (20 November 2008)
• SC08 SGI preps supers for future Intel chips (20 November 2008)
• Unisys, SGI - canaries in the coal mines (7 November 2008)
• Rackable swings to loss on lower sales (4 November 2008)
• Rackable does cookie sheet servers (30 October 2008)
• Rackable stays horizontal with x64 servers (21 October 2008)
• Rackable puts RapidScale storage biz up for adoption (14 August 2008)
• Rackable's super efficient gear fills the cloud (24 June 2008)