SGI sold to Rackable Systems for $25M, conditionally

Sunnyvale (CA) – Silicon Graphics Inc. (SGI) has reportedly agreed to sell its business to Rackable Systems for $25 million after returning to court today for bankruptcy protection. The sale is conditional upon higher bids offered at auction, and Rackable will also assume a portion of SGI’s outstanding debt.

Rackable Systems is server and data-center storage provider that is looking to add SGI’s high-performance server systems used in supercomputers to its line of business. The terms of SGI’s sale under bankruptcy results in $0.47 per share, which is 15% higher than the stock’s closing price on Tuesday.

Rackable Systems is currently facing a financial crisis of its own, having had five consecutive quarterly losses. The purchase is part of CEO Mark Barrenechea’s plan to strengthen the company’s offerings, by spending 10% of Rackable’s cash-on-hand to expand its product offerings as well as sales and service capabilities.

The Wall Street Journal reports on court papers filed by SGI that blame its business difficulties on a bankruptcy filing, and the subsequent challenges it has faced as a result after emerging from bankruptcy in October, 2006.

SGI was comprised of 1200 employees as of March 1, and 14 of its subsidiaries are also in bankruptcy. The company currently has $390.5 million in assets and $526.5 million in debt, some of which Rackable is willing to absorb as part of the hidden purchase price.

As of the most recent Top 500 Supercomputer ranking, SGI held the spot as the vendor with the fifth most systems in the top 500, behind HP, IBM, Cray and Dell. Their highest-performing system includes the #3 supercomputer, Pleiades – SGI Altix ICE 8200EX, Xeon QC 3.0/2.66 GHz (E54xx Harpertowns). The machine contains 51,200 cores, consumes 2 Megawatts and is located at NASA/Ames Research Center/NAS. It delivers a performance of 487 Teraflops max, with 608 Teraflops peak, roughly 44% of the #1 IBM supercomputer, which delivered 1.105 Petaflops, and 46% of the #2 Cray supercomputer, which delivered 1.059 Petaflops.

See The Wall Street Journal.