March 27, 1998
SGI Warns of a Loss for Quarter,
As Server, Workstation Sales Slow
Dow Jones Newswires
Struggling computer maker Silicon Graphics Inc. warned Friday that results
for the fiscal third quarter will come in significantly below analysts' estimates
due to slow workstation and server sales.
SGI, of Mountain View, Calif., said it will incur a "significant" loss. Eleven
analysts surveyed by First Call expected the company to report break-even
results on a per-share basis for the quarter, which ends later this month.
Shares of SGI fell 18.75 cents to close at $13.625 in New York Stock
Exchange trading.
SGI sees revenue at about $700 million, a figure that disappointed many
analysts.
"You hate to see how low their revenues are at this point," said Laura
Conigliaro, an analyst at Goldman Sachs & Co.
In the year-ago quarter, the company earned $10.5 million, or six cents a
share, including $8 million in merger-related costs, on revenue of $909.4
million.
"Our disappointing third-quarter ... results reflect
the continuation of several trends that have
affected Silicon Graphics over the past several
quarters, including declines in the Unix
workstation and supercomputer businesses and marketing execution
challenges in the server business," said Richard Belluzzo, who was named
chief executive officer of SGI in January. "We will over the next few weeks
unveil a new strategy that we believe will position us for renewed growth
through market focus."
Mr. Belluzzo is racing to base more of the company's workstation computers
on Intel Corp. chips to counter price competition. He came to SGI from
Hewlett-Packard Co., where he held the No. 2 job. Recruiting Mr. Belluzzo
came as a surprise to Wall Street and bolstered hopes about the ailing firm's
turnaround plans.
Mr. Belluzzo's top priorities include increasing SGI's customer base and
moving from a niche in high-end computer graphics into new products,
including computers used to manage Internet traffic.
"If there's a way to bring this company back, [Mr. Belluzzo] can find it," said
Goldman Ms. Conigliaro.
Once a Wall Street darling, SGI has repeatedly failed to meet profit and
product-shipment forecasts, a spiral that caused Edward McCracken to
announce plans to step down as CEO in October. While highly regarded in
entertainment and design circles for ultra-realistic graphics, SGI has been
overmatched by competitors such as H-P and Sun Microsystems Inc. in
selling its machines for broader corporate computing tasks.
One of the company's most pressing chores is to execute a promised
transition to computers using Intel semiconductors and Microsoft's Windows
NT operating system, from its longtime combination of proprietary chips and a
variant of Unix software. At H-P, Mr. Belluzzo helped manage a similar
process, and was the point man for the company's closer ties to Microsoft. |
