SGI (Formerly Rackable): Fiscal 2Q09 Preliminary Financial Results

Silicon Graphics International Corp. announced preliminary financial results for the second quarter of fiscal year 2009 and reaffirmed fiscal year 2010 internal plan. SGI is in the process of completing its FY2009 fiscal year-end audit, which will be impacted by purchase price accounting. The company expects to file its Q2 FY 2009 and FY 2009 annual results on a Form 10-Q, due on August 10, 2009.

“Ninety days ago we completed the acquisition of Silicon Graphics, and, over this short period of time, I have become even more excited about how compelling the market opportunity is. The strategic rationale has been well received by our customers, employees and business partners,” stated Mark J. Barrenechea, president and CEO of SGI. “Our integration is well under way and we are reaffirming our previously announced internal plan of $500 million in non-GAAP revenue.”

The company expects GAAP revenue for the second quarter of 2009 to be in the range of $55-$60 million, compared to $44.4 million for the first quarter of 2009 and $75.8 million in the second quarter of 2008. The company expects non-GAAP revenue for the second quarter of 2009 to be in the range of $57-$62 million.

The company expects GAAP gross margin for the second quarter of 2009 to be in the range of 6% to 10%, compared to 6.1% for the first quarter of 2009 and 9.0% in the second quarter of 2008. The company expects non-GAAP gross margin for the second quarter of 2009 to be in the range of 14% – 18%, compared to 6.3% for the first quarter of 2009 and 9.5% in the second quarter of 2008.

Q2 FY 2009 results are expected to be impacted by a variety of factors, including, change in fiscal year-end, purchase price accounting, including the fair value analysis associated with the Silicon Graphics, Inc. asset purchase, as well as other factors.

The company expects to record a one time, non-taxable gain associated with the difference between the Silicon Graphics, Inc. purchase price of $42.5 million and the fair value of the net assets acquired. The accounting purchase price fair value analysis will be included in the Form 10-Q.

SGI ended the second quarter of 2009 with $139.5 million in cash, cash equivalents, long-term and short-term investments, compared to $180.7 million at the end of fiscal 2008.

Business and Financial Highlights

On May 8, 2009, Rackable Systems completed the acquisition of substantially all the assets of Silicon Graphics, Inc. for $42.5 million in cash, plus the assumption of certain liabilities.
Rackable Systems changed the name of the company to SGI (Silicon Graphics International Corp.) and changed its trading symbol to (NASDAQ: SGI).
SGI introduced the CloudRack X2 targeting the growing workgroup cluster market.
SGI changed its fiscal year to end on the last Friday in June from the last Saturday in December. SGI’s most recent fiscal year, which began on January 4, 2009, ended on June 26, 2009. The change in fiscal year reduced the length of the quarter by eight business days.

Internal Plans for Fiscal Year 2010
SGI is not providing formal outlook but is reaffirming its previously announced internal plan. For fiscal year 2010 ending June 25, 2010 SGI is working towards an internal plan of:

$500 million in non-GAAP revenue
Non-GAAP gross margin in the twenties