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SGI financials disappoint

Low shipments and merger costs mean a second-quarter net loss for Silicon Graphics. The growing market share of NT boxes doesn't bode well, either.

CNET News staff
2 min read
Beset by lower-than-expected shipments and the lingering costs of a merger, workstation maker Silicon Graphics (SGI) reported a second-quarter net loss of $13 million.

SGI closed today at 27-3/8 a share, down 5/8 from yesterday.

SGI, which reported its results after the market's close, posted a loss equal to 7 cents a share for the quarter ending December 31 compared with net profits of $52 million or 30 cents a share a year ago.

The company attributed its loss to a delay in shipping its entry-level O2 workstations and Origin family of servers, along with $14 million in merger charges from its June acquisition of Cray Research. Without the charge, the company would have posted a profit of 1 cent a share.

SGI's performance was in line with analysts' expectations, which were lowered earlier this month when the company forewarned Wall Street it would not meet its estimates. Analysts had earlier projected earnings of 24 cents a share.

Revenues, meanwhile, rose 22.8 percent to $825 million for the quarter compared with a year ago.

"Despite our strong bookings, we did not reach expected levels of shipments due to delays in manufacturing ramp-up for some of our new products announced on October 7 and variations in product mix," said Edward McCracken, chairman and chief executive, in a statement. "While I'm disappointed in the results, I am encouraged by our customers' enthusiastic response to our new product line, as evidenced by our strong bookings and backlog."

Backlog orders were $757 million as of December 31 and product bookings reached $955 million, each the highest in the company's history.

Analysts are somewhat equivocal on the company's ability to move forward. "The company is forecasting a 20 percent growth for the next couple of quarters and it's being to feel a lot healthier than last three or four quarters," said John Jones, an analyst with Salomon Brothers.

But the key, he added. is whether the company's backlog of orders bears fruit. "They've been on the money from time to time, and they also have missed by a mile from time to time, so there's no consistent trend."

Despite its increased bookings, Unix-only vendor SGI is expected to encounter slower growth in its workstation business as it faces more competition from Windows NT-based personal workstation vendors like Compaq and Hewlett-Packard, according to IDC. And the research firms forecast that trend to continue through 1997.

The report found that personal workstation shipments grew 38 percent worldwide to 831,000 units in 1996, surpassing traditional Unix workstation shipments of 712,000 for the first time.

In 1996, SGI ranked third in the Unix vendor market with its 10.6 percent market share, according to IDC.

However, SGI manufacturers not only workstations but also the guts that go inside the machines, from high-speed chips to 3D software. And, of course, with Cray it has the behemoth supercomputers.