Silicon Graphics today announced results for its third fiscal quarter which ended March 25, 2005. Revenue for the third quarter was $159 million, in line with the preliminary results announced April 7, 2005. Gross margin was 34.5% compared with 37.5% in the second quarter. SGI's third-quarter operating loss was $45 million, compared with an operating loss of $9 million in the second quarter. The third-quarter net loss was $45 million or $0.17 per share, compared with a net loss of $11 million or $0.04 per share in the second quarter. GAAP operating expenses for the third fiscal quarter were $99.7 million compared with $92.9 million last quarter. Non-GAAP operating expenses were $85.4 million in the third quarter compared with $87.7 million last quarter excluding restructuring charges of $14.3 million and $5.2 million, respectively. Management believes that a non-GAAP presentation of operating expenses is useful to investors to facilitate period to period comparisons of SGI's operating results. "As we previously announced, our Q3 results were far short of our initial expectations," said Bob Bishop, chairman and CEO of Silicon Graphics. "Several major server and storage orders failed to close at the end of the quarter and we continue to see significant competitive pressure in the marketplace, which affects our margins as well as our revenue. Nevertheless, continued recognition of our Altix server line and the early adoption of our Linux-based Silicon Graphics Prism visualization system give us confidence that we are on the right track with the new product lines." Unrestricted cash, cash equivalents and marketable investments on March 25, 2005 were $84 million as compared with $106 million at the end of the second quarter of fiscal 2005. As previously announced, after the close of the quarter, SGI also renewed its asset-based line of credit with Wells Fargo Foothill, Inc. and completed the sale of a portion of its interest in SGI Japan for $29 million. Silicon Graphics recently completed the third quarter of its fiscal year 2005, which included key global sales wins across target markets, expanded alliances with important partners, and several strategic product introductions. High Performance Systems - Servers and Storage During the quarter, SGI introduced three significant high performance computing (HPC) products including two new midrange cluster solutions based on the SGI Altix 350: the factory-integrated SGI Altix 1350 Cluster, and the SGI Altix Hybrid Cluster solution; as well as the SGI InfiniteStorage TP9700, the industry's first 4 gigabits per second Fibre Channel storage array. In addition, SGI announced that 12 new storage-centric resellers around the globe had joined the SGI channel program to offer customers the benefits of highly scalable storage solutions. Among the SGI Altix and SGI InfiniteStorage customer wins this quarter were: * Pharmaceutical giant AstraZeneca International's research team in Molndal, Sweden, is focused on developing new drugs and treatments for gastrointestinal and cardiovascular diseases and conditions. To accelerate its R&D efforts, AstraZeneca purchased a 32-processor SGI Altix system outfitted with 64GB of memory to drive such HPC applications as Gaussian, AMBER and Gamess. The Altix system's global shared-memory architecture will make it easier for AstraZeneca researchers to work with increasingly large models and data sets. * German car manufacturer AUDI AG in Ingolstadt, Germany, will intensify its efforts to numerically simulate the cooling effects of engine compartment air flow by using a CAE solution environment based on SGI Altix 350 systems and SGI InfiniteStorage technology. To optimize aerodynamics between the increasingly dense packaged components under a car's front hood, the company ordered an Altix 350 cluster with 32 Intel Itanium 2 processors and 64GB of memory for running their computational fluid dynamics (CFD) codes Star-CD and MLET, as well as a four-processor Altix 350 with 48GB memory for simulation pre- and post-processing. Audi also purchased two SGI TP9100 systems. The storage solution gives Audi a redundant, highly available repository for model input data and simulation results. With the Altix cluster, Audi engineers will be able to run 32 processors in a Linux OS-based single system image configuration, giving large problems complete access to the entire available memory, or allowing engineers to run several smaller jobs in parallel. SGI won the Audi bid against Opteron processor-based cluster systems. * The Australian Partnership for Advanced Computing (APAC) is responsible for the national HPC facility in Australia that supports complex scientific analysis and computation applications for a broad range of research. To remain on the cutting edge of HPC technology, APAC purchased a 1,536-processor SGI Altix 3000 supercluster with 3TB of memory, a 128-processor SGI Altix 3000 system with 512GB of memory, and another 16-processor Altix 3000 server with 32GB of memory. SGI InfiniteStorage Shared Filesystem CXFS, a total of 120TB of Fibre Channel JBOD local storage, and SGI TP9500 completed the installation. Key features of SGI's successful proposal were the ability to provide large-node systems running SUSE LINUX Enterprise Server 9 operating environment, the performance of Itanium 2 processors, and the ability of SGI to deliver a high performance shared filesystem capable of supporting large cross-partition applications and efficient access to information. * To run a variety of scientific applications, mainly in theoretical chemistry and physics, Centre for Scientific Computing, University of Aarhus, Denmark (CSCAA), acquired a 64-processor SGI Altix system. CSCAA selected the SGI system because of the best price/performance and the Altix system's powerful global shared-memory architecture, along with the CSCAA's successful working relationship with SGI. * To provide additional news and sports channels and more features for its new 24-hour news channel, Czech Television (CT) public service television in the Czech Republic has purchased additional SGI InfiniteStorage systems, third-party hardware and software, and integration services from SGI Professional Services for completion of the second phase of its SGI server-based newsroom. On air since January 2004, the Digital News Production System (DNPS) will soon include a file serving solution based on an SGI TP9500 system, SGI InfiniteStorage RM610 system, SGI InfiniteStorage TP900, and an SGI Origin 350. This phase is expected to be completed in May 2005. SGI designed the overall digital architecture and is integrating key multi-vendor technologies including Ardendo LowRes transcode and browse and desktop editing systems, Aveco Master Control, Media Management and Clip Contribution Manager system (for clip exchange over IP between 16 Czech TV regional offices), 11 Pinnacle Liquid blue editors in Prague, and 16 Liquid purple editors for regional stations. The additional just-purchased storage will enable faster search and reuse of content and provide a robust central storage with easy, scalable growth and increased bandwidth for the all-digital workflow. * Seeking to expand one of the world's most advanced, workflow-efficient news and sports broadcast facilities to include television program production, Danish Broadcasting Corporation (DR) again turned to SGI compute power and integration expertise, as it has done since the SGI and DR digital conversion pilot program began in 1999. For this new stage, SGI, as prime contractor, is currently halfway through the process of enabling DR's asset management and archive system (co-developed by SGI, Ardendo and DR) to handle workflow for program production which includes SGI integration of 300 Avid DNA-based editing systems. The purchase also includes integrating a third SGI TP9500 system, doubling the central SGI server system to 24 and 48 processor systems, doubling network and Fibre Channel connections, delivering and integrating 15 Ardendo Ardcap dual-channel SDI/SDTI ingest systems and SGI video servers for studio productions, and developing ingest applications that support Panasonic P2 cameras. * EarthData International, LLC (EarthData), a remote sensing, mapping, and GIS services organization based in Frederick, Maryland, purchased an SGI InfiniteStorage highly available storage area network (SAN) solution with almost 50TB of Serial ATA storage. EarthData chose SGI because of their proven performance and scalability in data-intensive applications. The SAN solution will be used to increase the efficiency and cost effectiveness of collecting and transforming information about the earth's surface into spatially accurate mapping and GIS products for use in either GIS or design and engineering environments. * To speed up MPEG-2 ingest capabilities and handle greater amounts of data, France Télévisions Publicité (FTP), the advertising-production subsidiary of national broadcaster France Télévisions, purchased an additional SGI Media Server broadcast system for its central facility in Paris. FTP delivers advertising content to three main channels-France 2, France 3 and France 5-in addition to sixteen thematic channels and twenty two regional channels. Overwhelmed by the amount of videotape and the inherent problems of physically shipping it and storing it, FTP chose SGI two years ago to transform its production to an all-digital environment. Its IT-based workflow-digitally ingesting commercial spot content, editing specific commercial break sequences, and delivering content directly from the central location to the transmission servers-was specifically designed to allow for last-minute schedule changes that are impossible with a tape-based system. From ingest, video content is distributed as data files to smaller SGI Media Server systems, which provide playout services for the spots at the local transmission facilities. FTP uses an all-digital, disk-based architecture for commercial playout. It runs on SGI Origin servers with two Sony® PetaSite® systems, SGI Media Server for broadcast systems, SGI CXFS shared filesystem, SGI data migration facility (DMF) and other support equipment. * Frazer-Nash, a leading systems and engineering technology consultancy for the defense, transport, industrial and energy sectors, conducts advanced analysis to confirm product designs and to shorten product development cycles. The UK-based company purchased an eight-processor, 16GB Altix 350 server over a "white box" PC cluster after recognizing the Altix system's price/performance advantages and capabilities of SGI's global shared-memory architecture. * The French Ministry of Defense (DGA/CTSN), requiring a solution capable of computing and managing large-scale, memory-intensive problems, selected SGI server and storage solutions for a variety of classified projects. DGA/CTSN purchased a 32-processor SGI Altix 3000 system with 128GB of memory integrated with a SGI TP9300 array. DGA/CTSN selected SGI over competing systems after benchmark tests revealed SGI's leading price/performance advantages. * To handle growing chemistry data sets and further expand its HPC resources available to more than 800 researchers throughout Mississippi, the Mississippi Center for Supercomputing Research extended its SGI Altix installation with an additional 128 Itanium 2 processors and 128GB of memory, as well as 5.8TB of storage. The new additions build on the center's existing 64-processor SGI Altix system with 64GB of memory. * Pirelli Labs, the excellence research and development center of Italy's Pirelli & C. S.p.A. will use SGI server and storage technologies as tools for its advanced activities in the field of photonics and new materials. Pirelli, one of the world's leading makers of tires and advanced solutions for telecommunications, will drive its leading-edge design and analysis efforts with a milestone system: the 1,500th SGI Altix server sold worldwide The Milan, Italy-based facility purchased a 16-processor Altix 350 server with 32GB of memory, along with a SGI TP9300 solution to provide efficient management and access to design and analysis data. Together the SGI solutions will help Pirelli engineers conduct computational fluid dynamics and finite element analysis on new products and materials. * Israel's SemiConductor Devices (SCD), a manufacturer of infrared detectors and high-power laser diodes, requires HPC solutions to drive complex finite element modeling applications such as ANSYS. SCD selected a six-processor SGI Altix 350 server with 32GB of memory over competing solutions from HP. Leading performance, along with the Altix system's global shared-memory architecture and support for industry-standard technologies such as Linux and Itanium 2 processors, were key criteria in the sale. * To meet explosive data growth and performance demands, SonyDADC, a manufacturer of CD and DVDs for Sony and other content distributors, purchased a highly-available, shared filesystem, storage area network (SAN) configuration with tiered storage and data lifecycle management capabilities. This Fibre Channel RAID, Serial ATA and tape environment of over 100TB is forecast to be 500TB within 3 years, and all data is instantly available to all systems without copies thanks to the CXFS shared filesystem. SonyDADC chose the SGI InfiniteStorage solution because it cost-effectively met their current and future requirements for performance, scalability, openness and flexibility for growth. * To speed the design and analysis of new and safer automobiles, Tata Motors Limited, India's number one automobile manufacturer, purchased an array of SGI servers, storage and visualization systems. Tata plans to design complete car parts and assemblies by leveraging the power and high-bandwidth system architecture of several Silicon Graphics Fuel workstations and dual-processor Silicon Graphics Tezro systems. It will continue running its Product Lifecycle Management solution on the newly acquired 12-processor SGI Onyx visualization system and eight-processor Altix 3000 system with 16GB of memory and SGI TP9100 solution. Tata also purchased a high-density 64-processor Altix 3000 system with 512GB of memory and a TP9100 solution to enable more detailed virtual crash tests and other analyses to speed time to market and minimize operational costs. A longtime SGI customer, Tata selected the SGI solutions over competing products and will integrate them with its existing SGI installation at its R&D facility. Among the key determinants in the sale were SGI's NUMAflex shared-memory system architecture, a broadly scalable 64-bit Linux operating environment, and the powerful Itanium 2 processor architecture. * The University of Minnesota Supercomputing Institute pursues some of the most complex computing challenges in the world, with researchers aggressively working to break new ground in a broad range of disciplines, from computational genetics and biology to atmospheric sciences. To further those efforts and to accommodate single problems large enough to require up to 128 processors at once, the institute acquired a high-density, 256-processor Altix 3000 system with 512GB of memory, which has been integrated via InfiniBand with the facility's existing 128-processor Altix 350 installation and 48-processor Altix 3000 system. The new system was made available to users less than three days after it arrived. * The Bioinformatics Research Group at the University of Ulster in Coleraine, Northern Ireland, applies the latest technology to a broad range of study disciplines, including post-genomics and systems biology analyses, gene regulation modeling, molecular science and engineering, analysis of gene expression and protein unfolding simulation data, and projects with local impact, such as investigations into the prevalence of Vitamin D deficiency in Ireland. To further power its research efforts, the University purchased a 64-processor SGI Altix 3000 system. Visualization Systems Since its release last October, the Silicon Graphics Prism(tm) visualization system has been eagerly adopted by leaders in technical and scientific visualization. Growing acceptance by the manufacturing, sciences, energy, and government and defense industries continued during the third quarter and has set the stage for existing SGI application developer-partners to optimize their industry-leading software for the Silicon Graphics Prism visualization system. Also during the third quarter, SGI and Northrop Grumman Corporation announced a cooperative agreement to provide visualization solutions for customers in the U.S. Department of Defense, the U.S. Intelligence community, the U.S. Missile Defense Agency and the U.S. Department of Homeland Security. Among the Prism and visualization technology customer orders this quarter were: * Beijing Union Technology Co. Ltd., to boost its visualization and data storage and management capabilities for security surveillance applications, purchased an SGI Onyx 350 visualization system with 12 processors and three graphics pipes, and integrated with a 10TB SGI InfiniteStorage SAN featuring the SGI CFXS shared filesystem. By implementing CXFS, the company can efficiently share data across all of its computing platforms, including Sun and Windows NT systems. * The Louisiana Immersive Technologies Enterprise (LITE) is a joint project by the State of Louisiana, the Lafayette Economic Development Authority, and the University of Louisiana at Lafayette. When it opens in February of 2006, LITE will give Louisiana businesses and research universities a chance to use SGI compute, storage and visualization systems that will provide LITE users with multiple immersive environments capable of engaging workgroups of one to hundreds of participants. Located on the campus of the University of Louisiana at Lafayette, the $20 million, 70,000-square-foot LITE complex will be co-named the SGI Center for Innovative Research and Advanced Visualization. The facility will feature one of the most comprehensive and tightly integrated installations of SGI technology ever assembled, including: a 10-by-10-by-10-foot immersive visualization cube driven by a Silicon Graphics Prism visualization system with 16 Itanium 2 processors and six ATI graphics pipes; one of the world's largest SGI Reality Center installations driven by a second 16-processor Silicon Graphics Prism visualization system with six graphics pipes; a compact lecture theater featuring interactive dual DLP projectors driven by one of the two Silicon Graphics Prism systems; a conference room with a transportable SGI Reality Center fed by the facility's two SGI visualization systems; 22 Altix 350 servers, each powered by 16 Itanium 2 processors; and a SAN with the CXFS shared file system built on 8TB of SGI TP9500 Fibre Channel RAID. * To meet the computational demands of ever-larger data sets for seismic processing and interpretation, Marathon Oil Company, a long-time SGI customer, selected SGI HPC and visualization technology in support of its worldwide exploration activities. Marathon purchased a 64-processor upgrade to an existing SGI Altix 192-processor SGI Altix 3000 system (for a total of 256 processors) and an SGI Visual Area Networking (VAN) solution comprised of an eight-processor Silicon Graphics Prism system with 96GB memory and four ATI graphics pipes, an SGI Onyx system as well as four SGI Vizserver(tm) licenses for a VAN implementation. To provide the necessary storage of all technical computing data and make it instantly available on a SAN, Marathon also purchased CXFS shared filesystem licenses, 12.5TB of additional storage and additional SAN infrastructure. Marathon chose the CXFS filesystem because it allows for shared storage across a heterogeneous file system. Although clusters were considered, the Silicon Graphics Prism system's Itanium 2 processors running the Linux OS offered the performance needed for large memory and fast processing. SGI's global shared-memory architecture proved very important to Marathon's decision for the solution's ease of use, scalable upgrade capabilities and ability to visualize large 3D datasets for more accurate well drilling. * The Norwegian Defence Research Establishment (FFI), the main research institute for Norwegian defense, acquired a Silicon Graphics Prism visualization system with two graphics pipes, four Itanium 2 processors and 4GB of memory for development of visualization solutions that enable concept studies and virtual tests of new prototypes. Vital to the selection of SGI over standard PC-based graphics solutions were the Silicon Graphics Prism system's leading performance, shared-memory architecture, high internal bandwidth, and support for a standard 64-bit Linux environment. * To meet growing capacity and performance demands caused by the explosion in 2K and 4K film data-and to keep that data always available in real-time for producers and artists-Pacific Title & Art Studio installed the SGI InfiniteStorage TP9700 Fibre Channel array from SGI and Engenio Information Technologies. Since implementing the industry's first storage array equipped with a 4Gb/second Fibre Channel interface, Pacific Title's SAN infrastructure sees performance results that are 1.5 times faster. In addition, the SGI TP9700 provides 1.6GB/s of sustained throughput to meet the scanning demands of 4K film, which requires 1.3GB/s. Data throughput and storage demands of scanning negatives into digital format, creating visual effects, performing film restoration and archiving have grown rapidly, leading Pacific Title to this new cutting-edge expansion of their existing SGI heterogeneous SAN infrastructure, which incorporates SGI TP9500 2Gb/s Fibre Channel arrays from SGI and Engenio, SGI Onyx visualization systems and SGI Origin servers for Linux and Windows clients. With the addition of SGI TP9700 4Gb/s technology, Pacific Title is able store and move data without bottlenecks, allowing the studio to deliver 2005 blockbuster projects such as the Fantastic Four, Elektra and War of the Worlds ahead of schedule, avoid overtime costs which occur when producers and artists cannot access data, and meet the future demands of the film industry. * For its work on experimental fusion devices. Princeton Plasma Physics Laboratory (PPPL) turned to SGI technology for the computational capabilities to support huge simulations and the graphics power to visualize and analyze those simulations on its 12-ft. display wall. PPPL, a collaborative national center for plasma and fusion science managed by Princeton University for the U.S. Department of Energy, Office of Science, needed the interactivity and high-performance visualization that few in the visual systems industry could support. Because its cluster was inadequate for scientists to explore their data, PPPL was attracted to the Silicon Graphics Prism system's shared memory capability and scalability. PPPL needs the power to visualize terabytes of data, and soon 10TB and beyond, generated from SIDAC (Scientific Discovery through Advanced Computing) codes, which have the potential to produce terabytes to petabytes of data per simulation. PPPL's initial SGI configuration includes a 16-processor SGI 350 system used for HPC and a 6-processor Silicon Graphics Prism system with four graphics pipes feeding the visualization wall's eight projectors. The Prism system is delivering immediate interactivity and greatly increased power using industry-standard components.