SGI Cuts 250 Jobs, CFO, COO


Hungry to return to profitability after hemorrhaging cash for years, Silicon
Graphics today said it would trim 250 positions and announced key management
changes as part of a corporate restructuring.


SGI accepted the resignations of CFO Jeff Zellmer and COO Warren Pratt who
are leaving to pursue other interests. Kathy Lanterman, currently the
corporate controller at SGI, will replace Zellmer, SGI said in a statement.


The restructuring charge, including severance and other charges, is expected
to be about $20 million over the next several quarters.


The moves are part of SGI CEO Dennis McKenna’s cost-cutting plan to save
$150 million by the end of 2006.


“As promised in late January, the goal for my first 30 days at SGI was to
solidify a strong business foundation and assemble an organization that is
laser-focused on execution,” said McKenna.


SGI was once a pioneer in the high-end computing space, selling
high-performance servers, storage and graphics technology to researchers in
life sciences, physics and other fields looking to tackle tough computing
tasks.


Sales for the company’s homespun computing gear, based on MIPS RISC
processors and the antiquated IRIX operating system, have spiraled for the
last couple of years.


The Mountain View, Calif., company has shifted its focus to selling open
source, Linux-based machines with Intel Itanium chips. Problem is, Itanium
hasn’t been the savior SGI thought it might be.


McKenna joined the company on Jan. 31, the same day SGI announced dismal
second-quarter earnings.


SGI’s 2Q sales plummeted to $144 million from $223 million in the year-ago
quarter. Product sales fell from $117 million to $69 million for the same
period.


McKenna, who returned SCP Global Technologies to profitability by realigning
the services business and executing a technology sale, said the next step in
his strategy is to make SGI’s products more attractive in a competitive
marketplace. To wit, the company will consolidate its compute server and
visualization platform.


SGI will also pursue new markets in the enterprise space.


Once a leading high-end computer provider for research and other areas that
required high performance, SGI will also add mid-range products to its
arsenal.


The board of directors said it continues to explore all strategic and
financial options as management moves to stabilize the business. This
includes hiring talent to bring in the right skill sets for channel, product
and business development.


This could also include selling the company, which has been delisted from
the New York Stock Exchange since November.

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