Rackable Acquires Silicon Graphics after Second Bankruptcy
Breaking News – Silicon Graphics International (SGI) files again for Chapter 11 bankruptcy and Rackable announces that they are acquiring the company for $25 million USD. On first response, this sounds like a great deal. SGI can eliminate and restructure a large portion of their debt, and Rackable gets a huge bargain on one of Silicon Valley’s all time great companies. In 1995, according to Wikipedia, Silicon Graphics was valued at roughly $7 Billion USD – selling at less than 1% of that merely 14 years later. SGI’s problems are similar to those of Sun, Cray, and even IBM… historical makers of mainframe supercomputers unable to keep up in R&D / relevancy vs. Intel / AMD / Nvidia.
What will happen to shareholders of SGI stock is unknown – it looks to be a wipeout with total loss of value there. Trading of SGIC stock was suspended by NASDAQ around March 12th, 2009 – the company was appealing the decision, but (even though no official announcement has been made yet) it looks like it will probably stay de-listed and the assets / trademarks of SGI will be absorbed in Rackable. When it comes down to business plan, SGI seems to have been making some great process in building high-end, custom servers with Intel’s new Xeon chips.
According to a press release1:
Coinciding with today’s worldwide launch of the Intel(R) Xeon(R) processor 5500 series (code-named Nehalem), Silicon Graphics announced it will feature the next-generation processor in it’s award-winning SGI(R) Altix(R) ICE integrated blade platform.
By integrating the scalable, I/O-intensive SGI Altix ICE platform with the high-bandwidth memory design of the Intel(R) Xeon(R) processor 5500 series, Silicon Graphics is delivering a unique solution that helps organizations avoid the costly performance inefficiencies that can occur when large data sets and intense processing overwhelm the comparatively slow memory, I/O and interconnect infrastructures of other commodity Linux(R) clusters.
To remain competitive, users today require their IT platforms to deliver results much sooner, even as their applications increase in complexity and data sets grow exponentially,’ said Silicon Graphics CEO Bo Ewald. ‘The SGI Altix ICE platform is unique in its rich I/O infrastructure and high-bandwidth interconnect design, which makes it an ideal platform for solving big data problems with the new Intel(R) Xeon(R) processor 5500 series.
A lot of talk was revolving as to whether SGI could build a new market share by producing high-end servers for the emerging cloud, in addition to its academic, research, graphic workstation, and existing corporate accounts. For Rackable to acquire all of the talent, physical resources, trademarks, and intellectual property of SGI is just an incredible deal, and it brings a respected client list with possibility for expansion of sales for the company in many directions. Clearly, Rackable is an aggressive and moving company, and looks to emerge from the economic downturn in a very strong position.
According to Business Journal2:
The combined company will be positioned to solve the most demanding business and technology challenges our customers confront today,” said Mark J. Barrenechea, Rackable CEO. “In addition, 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.
We have been working very hard to strengthen our company, and today, we’ve taken another big step in that direction,” stated Robert Ewald, CEO of Silicon Graphics. “This transaction represents a compelling opportunity for Silicon Graphics’ customers, partners and employees, who can all benefit from the emerging stronger company with better technologies, products and markets reach.
That companies like Sun and SGI can see billions of dollars in market cap evaporate so quickly is amazing, and a warning to current Valley companies like Google. Imagine Google, 10-15 years later, sold for $25 million, delisted from NASDAQ, and in Chapter 11… SGI once had the same magic aura and sense of awe that Google has now, albeit search and hardware are very different businesses. SGI is still a powerful trademark and with the exception of the stigma of two bankruptcies and epic collapse (which would probably dissuade Rackable from operating under that name totally), but it is easy to see Rackable rebranding and expanding a powerful line of servers and workstations under the SGI name.
Congratulations to both companies, and best of luck in the future… I hope SGI can continue and that Rackable can allow the company & its research to grow to become as innovative in the future as it was in the past. More information on the details of both the Bankruptcy and Acquisition should become clear in the next few days.
- http://sev.prnewswire.com/computer-software/20090330/SF8993330032009-1.html [↩]
- http://sanjose.bizjournals.com/sanjose/stories/2009/03/30/daily41.html?ana=yfcpc [↩]
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2 Responses to “Rackable Acquires Silicon Graphics after Second Bankruptcy”
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leyendo que Rackable acaba de comprar Silicon Graphics. Pensar que una vez hubo una Indigo en mi escritorio, snif. http://is.gd/q6Zx
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Nice article on SGI