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Silicon Graphics returns from near-death experience

Silicon Graphics returns from near-death experience

Silicon Graphics (SGI) is back in business. The company went into Chapter 11 bankruptcy proceedings earlier this year, but the stage is set for the company to re-emerge into the industry following a ruling at the New York bankruptcy Court this week.

Judge Burton Lifland ruled that all the necessary requirements have been met for SGI to implement its plan of reorganization.

What this means is that SGI has eliminated its debts and has cut costs -- by laying-off some 12 percent of its workforce, down to 1,600 from 2,200, and cutting US$150 million from its annual manpower bill. It's also negotiated an $85 million loan from Morgan Stanley, and a $30 million line of credit from General Electric Capital that will be used to pay off bridging loans and to provide operating capital.

"This is a great day for SGI. We have accomplished so much in just five months, reaching our confirmation on the fast track that we expected," said CEO and chairman Dennis P. McKenna.

"As we emerge, the recapitalization of the company will be complete. We have re-engineered the company and have a strong leadership team that will be executing this plan. Also of significance to the growth of the company is that during this time, we retooled and aligned our product portfolio to the strategic direction of the company. I want to thank our customers, vendors and employees for supporting the company through this challenging period."

SGI rose to fame on the back special effects for movies such as Jurassic Park but, as standard machines became increasingly powerful, the market for proprietary and expensive hardware shrank. But, once known for its proprietary MIPS microprocessors and Irix operating system, the company has been forced -- like so many before it -- to adopt industry standards in place of more expensive, less flexible proprietary architectures.

SGI will withdraw the final MIPS/Irix products at the end of 2006, some 18 years after their first arrival. Instead, SGI has moved its graphics-oriented systems to the Intel Itanium 2 platform and positioned itself as a producer of high-performance computing (HPC) technology products.


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