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- 14.12.2007
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SGI declares bankuptcy, to sell itself to Rackable Systems:
Silicon Graphics Inc. returned to bankruptcy-court protection Wednesday and immediately agreed to sell its business to Rackable Systems Inc. for $25 million, subject to higher bids at auction.
Rackable said it would merge its servers and data-center storage products business with Silicon Graphics, which makes servers and provides high-performance computing products. Rackable, of Fremont, Calif., is also offering to take on certain liabilities associated with Silicon Graphics' assets.
Rackable, which has posted five consecutive quarterly losses, has been looking to boost its global services business. Chief Executive Mark Barrenechea said in February that the company planned to invest 10% of its cash to expand product offerings and sales and service capabilities.
The $25 million offer works out to about 47 cents a share, a 15% premium to Silicon Graphics' closing price Tuesday. In court papers, Silicon Graphics, of Sunnyvale, Calif., blamed its bankruptcy filing on the challenges it has faced since its emergence from bankruptcy protection in October 2006.
Among the obstacles were so-called legacy problems left over from the first restructuring, including a burdensome cost structure, increased competition and delays in the introduction of new technology. Silicon Graphics said it also fell short of its goals to penetrate new markets for its technology products and services.
Together, these challenges hurt Silicon Graphics' overall financial performance by slashing its revenue, and causing net losses as well as a drop in cash levels.
In its Chapter 11 petition, filed with the U.S. Bankruptcy Court in Manhattan, Silicon Graphics reported $390.5 million in assets and $526.5 million in debts. Silicon Graphics had received a delisting notification from the Nasdaq Stock Market last month because it failed to comply with market-value requirements for companies listed on the exchange.
Joining the company in bankruptcy court are 14 of its subsidiaries. Silicon Graphics employed nearly 1,200 workers as of March 1.