SGI files for Chapter 11 protection

The once-popular Silicon Valley server and workstation maker grapples with financial ills.

A correction was made to this story. Read below for details.
Silicon Graphics Inc. announced on Monday that it has filed for Chapter 11 bankruptcy protection as it seeks to reorganize and re-emerge from its financial woes.

SGI, a former high-flying server and workstation maker for Hollywood and the graphics industry, said it reached a voluntary agreement with its debt holders to simplify its capital arrangements and cut its debt by about $250 million under the reorganization plan.

The company, which made its filing in the U.S. Bankruptcy Court for the Southern District of New York, said it plans to turn in a reorganization plan to the court soon and to emerge from Chapter 11 within six months.

"This is a necessary and responsible step that will strengthen the company and foster a sustained turnaround at SGI," Dennis McKenna, chief executive, said in a statement.

SGI, which is based in Mountain View, Calif., already has a history of turnaround attempts.

Its latest was initiated in March, when SGI cut 12 percent of its work force and hired a new chief financial officer and chief operating officer. The moves were part of a plan from McKenna, who was . McKenna said he wanted to expand into new customer markets, such as telecommunications, that have high computing needs.

And under SGI's previous CEO, Bob Bishop, the company launched a restructuring effort in 2000 to shift its focus away from selling supercomputers, multimedia software and embedded chips for consumer devices to one that focused on much smaller markets, such as digital content creation and supercomputing for technical and scientific projects. SGI's technology, for example, played a role in creating content for such movies as "Lord of the Rings."

Before Bishop's arrival in 1999, then-CEO Rick Belluzzo also initiated a turnaround effort at SGI that included cutting 1,500 positions and selling off its Cray supercomputer unit.

Despite these and other efforts since the early 1990s, the company has continued to encounter losses and lose favor with investors. Late last year, SGI's stock was delisted after falling below New York Stock Exchange requirements.

 

Correction: This story misstated the exchange that delisted SGI's stock. The company was delisted from the New York Stock Exchange.
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