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SGI Gets Deeper Into Linux Networx

Barely out of bankruptcy itself Silicon Graphics (SGI) acquired troubled high-performance computing vendor Linux Networx (LNXI).

SGI is acquiring LNXI for 390,000 shares. SGI's shares closed at $17.91 at the end of trading on Feb 15.

As part of the acquisition, SGI is acquiring Linux Networx technology as well as patents that cover cluster optimization, design, power and cooling. The acquisition will also reunite SGI CEO Bo Ewald with his former company. Ewald was CEO of Linux Networx until April 2007.

"This is another significant step in the growth of SGI," said Bo Ewald, SGI CEO, in a statement.

"This represents the first of such key technology acquisitions and will help further the development of our software environment and support for our clustered systems," he said.

It is not yet clear how many of LNXI's staff will be joining SGI. Roy commented that SGI has made offers to LNXI staff and management but have not yet received all of the replies, though she noted most were positive so far.

[cob:Related_Articles]While SGI is acquiring LNXI, SGI is not planning on adding LNXI products to the SGI product portfolio. Roy noted that the benefit of the acquisition is on the technology and not the product side.

She commented that LNXI has some key large system cluster management technology that SGI is keen to take advantage of. Roy added that the LNXI technology components will over time find their way into SGI products to help accelerate SGI's road map.

"We believe we have an excellent product line today and don't need to offer additional products today that could add to the complexity of our business," Roy said.

That said, Roy noted that SGI would continue to try and support LNXI's existing customers with SGI's service offering and with the staff that may come over from LNXI.

LNXI had a number of deployed products in the marketplace, including its ST2822 and ST6998 Storage Systems and the LS-1 midrange supercomputer.

LNXI also had some success selling to the Department of Defense.

Roy commented that SGI also has Defense customers and in general SGI would be reaching out to all of LNXI's customers in the coming days and weeks.

"We have found there is some overlap in customers, though it's not 100 percent," Roy said. "Part of the opportunity for us is to broaden our footprint into some of their accounts."

The fact that current SGI CEO Bo Ewald was formerly the CEO of LNXI helped to expedite the deal according to Roy.

"The fact that he has close experience with Linux Networkx means that there was less discovery that was required in terms of matching up company, products and people," Roy said. "I think that helped us in terms of bringing this deal together."