SGI earnings will disappoint

Silicon Graphics announces that its first quarter earnings will be below analysts' estimates.

CNET News staff
Silicon Graphics (SGI) today said its first quarter earnings will be below analysts' estimates.

The news was announced after the market's close. The market had been expecting 29 cents per share.

"Our results for the current quarter have been adversely affected by two unusual factors in addition to normal seasonal slowness," said Edward R. McCracken, chairman and chief executive officer, in a statement.

The first problem were slower sales which occurred in anticipation of major product announcements that will be announced in October.

The second issue stemmed from manufacturing problems that a supplier of Silicon Graphics' R10000 ? microprocessor encountered which created defective parts in the system, said Stan Meresman, chief financial officer, in an interview with CNET.

SGI stopped shipping products until the problem was resolved. Meresman confirmed that the issue has since been resolved and SGI is replacing parts in 4,000 systems and expects to take a one-time charge of a few million dollars, as a result.

"We shipped a microprocessor that may have potential problems, so we're retrofitting all systems in the field to make sure customers have a reliable system," he said.

Revenues for the quarter ending September 30 are also expected to be only slightly higher than the combined $758 million SGI and Cray Research reported for the same period a year ago. The acquisition closed on June 30.

The company will announce its results October 17.