I just picked this up about Silicon Graphics. It addresses this type of value disparity:
With the heavy volume and sharp uptick in shares of Silicon Graphics (NYSE:SGI - news) -- from 8 1/4 on Nov. 26 to 11 1/4 Friday, you'd think the old workstation maker had become a Linux play. Well, if you thought that, you'd sort of be right.
The company that likes to call itself simply SGI actually did issue a news release last week trumpeting a series of technologies and software "tools" that help developers install and use Linux operating software. What with all the excitement around sizzling IPOs like Linux-based appliance maker Cobalt Networks (Nasdaq:COBT - news) (down 6% last week but still worth six times its Nov. 5 IPO price) and VA Linux Systems (Nasdaq:LNUX - news) (whose www.linux.com domain name alone must be worth a mint), surely SGI can find a way to cash in.
Actually, SGI is finding a way. That's because it owns almost 1.3 million shares of VA Linux Systems, according to a spokesman for the company. That stake, worth about $280 million, makes for a decent investment by SGI, which said several months ago that it had paid $5 million for a piece of then-unknown VA Linux.
More notable is that the tiny VA Linux stake is worth more than a tenth of SGI's overall market value of $2.1 billion. Also boosting SGI's valuation has been the run-up lately in shares of MIPS Technologies (Nasdaq:MIPS - news) , which have doubled to 61 1/16 since the beginning of November. The stake in former subsidiary MIPS is worth about $1.6 billion. And so once again, as suggested here in September, the marketable parts of SGI are worth nearly the same as the whole.
Laura Conigliaro, hardware analyst with Goldman Sachs, alerted clients last week to the disparity between SGI's price and those of the companies in which it holds stakes. She says that the business appears to be tracking to her estimates but that "this company has an overabundance of things to get done in December."
Translation: SGI's underlying assets can move this stock a bit. But only performance by the company itself can ever send it soaring again.
(Taken from THESTREET.COM |
