Silicon Graphics? stock plummets 34 percent after the company announces that its first-quarter earnings will be significantly less than expected.
Shares of SGI fell another point today after plummeting as much as 34 percent yesterday before closing the day at 18-1/16.
A handful of ratings cuts followed. ABN/Amro, Hambrecht & Quist, and Salomon Brothers cut their ratings to "hold" from "buy." Merrill Lynch cut its rating to "near-term neutral" from "near-term accumulate."
Salomon Brothers also lowered its fiscal 1998 estimate to 65 cents a share from $1.55 per share, and dropped 1999 estimates to $1.25 from $1.90 a share.
Silicon Graphics said it anticipates a net loss of approximately 20 cents per share for the quarter ended September 30. This figure does not include charges incurred for the acquisition of ParaGraph International. The company reported a net loss of 13 cents per share for the same quarter last year. The workstation maker also said it expects revenues of approximately $760 million, down from $765 million a year ago.
Analysts expected the company to report earnings of 7 cents per share for the quarter, according to First Call.
Silicon Graphics CEO Ed McCracken characterized the results as "unquestionably a step backward" from the company's strong fourth quarter. He attributed the slip to a weak server market and sluggish sales.
"Our Origin families [of servers] and their predecessors grew about 15 percent year over year, well below what we expected. This shortfall was especially felt in the U.S., which was a surprise to us, because our server business has in recent periods been a real growth engine for us," McCracken said. "The shortfall was a combination of bad timing, a strong Q4, and deferral of business to Q2, compounded by poor sales and marketing execution."
Silicon Graphics has endured a turbulent year. Following a couple of weak quarters, the company's stock surged after many analysts upgraded it to a "buy" rating from "hold" when the company reported net profits of $102.4 million, or 56 cents a share, for the period ending June 30. Year-ago figures for the same quarter reported a loss of $48.7 million, or 30 cents a share.
At that time, both Silicon Graphics and analysts who follow the company were optimistic that the company had completely turned itself around.
Kevin Burr, a spokesman for the company, said that Silicon Graphics will carefully review its operating expenses, but declined to comment on where any specific cuts would be made in the future, or whether any layoffs were expected.