SGI drops on weak revenue

SGI stock plunges 37 percent after the high-end computer maker posts lower-than-expected revenue and a loss of $41 million for its first quarter.

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Stephen Shankland

Oct. 22, 2002 2:38 p.m. PT

2 min read

SGI stock plunged 37 percent Tuesday after the high-end computer maker reported revenue lower than analyst expectations and a loss of $41 million for its most recent quarter.

The Mountain View, Calif.-based company had revenue of $241 million for its first quarter of fiscal 2003, ended Sept. 30. That was well under the expectations of analysts such as UBS Warburg's Don Young, who had projected revenue of $255 million. It also was less than the $379 million revenue posted in the year-ago quarter, and SGI Chief Executive Bob Bishop said the company was "disappointed" with the figure.

By the end of trading Tuesday, SGI stock dropped 41 cents, or 37 percent, to 80 cents per share.

After an abortive attempt to expand into the general-purpose server market, SGI has retrenched to its niche selling high-end machines used for visually intense tasks such as designing cars, looking for oil and gas fields, and creating the digital imagery such as that used in the "Lord of the Rings" movie series.

But Young isn't optimistic that SGI will be able to maintain its stronghold. "We continue to view SGI's core focus on 'Big Data Visualization' as nondefensible," he wrote in a report Tuesday, saying he believes collections of lower-end computers will gradually replace the more specialized high-end systems. Young expects revenue of $252 million and a loss of 17 cents per share for SGI's current quarter.

The company could benefit from coming products, though. Due next month are new servers from the company, including its long-awaited Itanium 2-based server and enhancements to its Origin 3000, the company said.

SGI's loss of $41 million, or 21 cents per share, was less than its $69 million loss in the year-ago quarter. However, it was deeper than the loss of 13 cents per share expected by analysts surveyed by earnings tracking firm First Call.

The company cut its expenses in the first quarter from $426 million to $282 million, but the value of cash and marketable investments dropped from $218 million in the previous quarter to $191 million.

Also Tuesday, SGI announced the appointment of a new board member, Lewis Edelheit, who retired in 2001 as General Electric's senior vice president of corporate research and development.