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Rackable Picks Up SGI for a Bargain Price

After 12 years of painful decline and numerous reinventions, Silicon Graphics (SGI) -- the one-time Unix giant that became a Hollywood star of its own when its computers brought the dinosaurs of "Jurassic Park" to life -- sold itself to Rackable Systems today for about the equivalent of Steven Spielberg's lunch money.

Rackable (NASDAQ: RACK) paid $25 million in cash, but also agreed to assume certain liabilities with the purchase, and there's a lot of those.

As of its most recent quarter, SGI (NASDAQ: SGIC) had $119.7 million in long-term debt and only $39.5 million in cash. As such, SGI has also filed for Chapter 11 bankruptcy protection -- again. It last went through bankruptcy in 2006.

Rackable makes ultra-dense rack-mounted computer systems for datacenters, while SGI specialized in racks and blades built on x86 technology but using a lot of legacy SGI technology, like its NUMA architecture, which provides an extremely fast connection between processors.

The company seemed for a time to find its footing with a focus on high performance computing (HPC), making its presence felt in the Top 500 supercomputer list and building a petaflop system for NASA, but sales have fallen off there as well.

"This combination gives us the potential for significant operational synergies, a strong balance sheet, and positions the combined company for long-term growth and profitability," said Rackable CEO Mark Barrenechea in a statement.

Rackable spokespeople were not available for further comment by press time.

SGI recently laid off 15 percent of its workforce, leaving it with about 1,100 employees. Rackable is in Sunnyvale, Calif., while Rackable is a short drive away in Fremont, Calif.

It's a bitter end for a once-great company that made the nightly news for its technology, which had been used in creating computer graphics-rich films like the Spielberg-directed "Jurassic Park." George Lucas's Industrial Light and Magic had been heavily invested in SGI hardware for many years.

Then the firm hit the skids, going through more identities than Sybil. "SGI was a company that seemed to be constantly in search for the market they wanted and constantly unable to hold on to the market they had," said industry analyst Rob Enderle, president of The Enderle Group.

Over his years in the Valley, Enderle said he had been briefed by SGI's revolving door of executives on small-scale servers, mid-range servers, then NT workstations, then media creation servers and eventually HPC systems.

"They seemed to do best in the large-scale media creation space and file management. That was probably their niche, and every time they tried to break out of their niche, they got in trouble," Enderle said. "They were a company that seemed to be constantly in flames, and the ever-changing executive staff were constantly running around trying to put the flames that they created."

SGI's film work isn't its only major legacy, however: The company's former, luxurious headquarters in Mountain View is now home to Google.

"Out of the ashes rose other things," Enderle said.