SGI Posts Wider Loss as Sales Fall

Computer maker Silicon Graphics Inc. on Monday reported a wider quarterly loss as revenue fell because of slower sales of high-end Unix workstations and a seasonal slowing in its services business.

For the fiscal first quarter ended Sept. 26, SGI said it had a net loss of $47.9 million, or 23 cents a share, compared with a year-earlier net loss of $41.1 million, or 21 cents. Revenue fell 9.8% to $218 million.

But the Mountain View, Calif.-based company said it had made progress compared with the fourth quarter, noting the increase in its gross margin to 43.4% in the first quarter from 40.3% in the fourth quarter.

Jeffrey Zellmer, SGI’s chief financial officer, said that the decline in Unix workstation sales reflected an industrywide move to cheaper, so-called Whitebox personal computers.

“The shrinkage in that business exceeded the growth we saw in our server business,” Zellmer said, adding that overall revenue in SGI’s server business, which includes its storage and high-end graphics business, rose about 10% year over year.

Zellmer also said that this quarter SGI started shipping increasing numbers of its Altix servers using Intel Corp.’s Itanium 2 processor to large businesses such as Boeing Co., Honda Motor Co. and Motorola Inc.

Excluding $24.2 million in other operating expenses, related to severance and other noncash charges, SGI said its operating loss was $19.4 million, narrower than its operating loss in the fourth quarter of $21.9 million.

Shares of SGI, whose customers are defense contractors, the U.S. government and Hollywood studios, rose 3 cents to $1.15 on the New York Stock Exchange.