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"Disappointing" revenues depress SGI earnings

The high-end graphics workstation maker reports a net loss of $18 million, or 10 cents a share, a deeper loss than analysts' predicted.

"Disappointing" revenues from a delayed new chip led SGI to post a loss deeper than analysts expected today.

The company, which builds servers and high-end graphics workstations and is shifting its product line to Linux, reported a net loss of $18 million, or 10 cents a share, compared with a net loss of $40 million, or 21 cents a share, the year before. Analysts surveyed by First Call expected a loss of 7 cents per share for the most recent quarter.

"The revenue level of this last quarter was disappointing, but largely attributable to the delayed introduction of the R12K 400-MHz processors and expectations of new products," chief executive Bob Bishop said in a statement. Revenue was $564 million for the quarter, a 9 percent drop from the $619 million reported in the year-ago period, the company said.

The company, famed for its work in visualization and graphics, has been in the middle of a years-long restructuring and several quarters of unprofitability. The restructuring began with an embrace of Windows-based workstations, but delays in the strategy led to the departure of chief executive Rick Belluzzo, the demise of its fancy Windows product line, and then a new plan to bring the company back to its roots.

SGI is in a difficult position, with delayed products and competitors eager to steal away its business, said Sarang Ghatpande, an analyst with D.H. Brown Associates. In addition, SGI is having a harder time convincing software writers to stay with the company.

"They're not sure SGI will stay in the business for the long run," Ghatpande said.

In particular, Sun Microsystems, Hewlett-Packard, IBM, Dell Computer and Compaq Computer are scrapping for SGI's customer base.

Bishop promised that new products to be introduced in the next few months "will fuel long-term growth and profitability." Those products include a next-generation version of the company's high-end server, the SN-1, as well as new workstations and Linux servers, Bishop said.

The results for the third quarter, which ended March 31, included an $18 million reduction in restructuring charges as well as a $21 million loss from the sale of Cray Research. SGI expects a $15 million gain from the Cray sale later.

CNET's Linux Center Excluding the Cray and restructuring factors, SGI would have lost $16 million, or 9 cents per share, the company said.

The company has an order backlog of $240 million.