SGI's third-quarter results come as the company last week unveiled plans to revitalize its operations. The workstation and server company said it will spin off its chip design business for embedded products, and eventually phase out its MIPS microprocessors for its high-end workstations and servers in favor of using Intel chips. The company also plans to cut operating expenses by $200 million during fiscal 1999, and reduce its workforce of 10,500 by nearly 10 percent through divestitures, streamlining, and other efforts.
SGI's revenues for the quarter fell to $708 million, down 22 percent from a year ago. The company reported a net loss of $153 million, or 81 cents a share, for the quarter ending March 30, compared with profits of $11 million, or 6 cents a share, posted a year ago.
Excluding restructuring charges, the company would have posted a loss of $68 million, or 36 cents a share. Those earnings were in line with analysts' revised estimates of a loss of 36 cents, according to First Call. Last month, SGI warned that it expected to post a "significant loss." At the time, Wall Street had expected the company to break even for the quarter.
"We are aggressively focused on executing the strategic plan we outlined last week," Richard Belluzzo, SGI's chairman and chief executive officer, said in a statement. "We're targeting key markets that value our strength in visualization and high-performance computing with a product road map that leverages industry-standard technologies. Combined with a comprehensive focus on improved business execution, we're taking the steps that will enable Silicon Graphics to return to long-term growth and profitability."
SGI has been under increasing pressure from aggressive Wintel vendors such as Compaq, Hewlett-Packard, and Dell, which often price their products well below SGI's products. But SGI said it plans to step up its efforts to compete with those companies in late summer, by launching its own version of NT workstations.
Analysts expect SGI to end the fiscal year with a loss and revenue decline over the previous year. That would mark the first time the company has fallen into the red and posted a revenue drop in at least five years.
"The real interesting investment question is, how will they do in fiscal 1999?" said Doug van Dorsten, an analyst with Hambrecht & Quist.
Van Dorsten said he'll be watching for the speed with which SGI can turn an operating profit, bolster its cash by taking such moves as spinning off a portion of its MIPS business, and maneuver through a successful transition to a new lineup of products.
SGI shares closed up 0.19 today, at 13.75. The shares have traded as high as 30.31 and as low as 10.94 during the past 52 weeks.