ACADEMIA

SGI has announced financial results for the third quarter of fiscal 2008, which ended March 28, 2008. "We have made great strides in continuing to execute on our strategy this quarter," said Bo Ewald, SGI Chief Executive Officer. "We saw a 50 percent increase in orders compared to the third quarter of last year, acquired significant software assets to strengthen our business and accelerate development of our Industrial Strength Linux Environment, announced a new support solutions program to reinforce our services offerings, and continued building on solid traction in our core markets. And with new significant customer wins in April, the fourth quarter is off to a strong start as well." Third Quarter FY08 Highlights Overall in its third quarter, SGI:

• Grew orders 50 percent over orders received in the third quarter of the prior year
• Grew backlog to $134 million as of March 28, 2008, an 80 percent increase over the beginning of the company's fiscal year on a comparable basis
• Accelerated its software strategy with acquisition of key IP assets formerly owned by Linux Networx

GAAP Q3 Results GAAP revenue for the third quarter was $79.1 million, compared to $90.1 million in the second quarter. The third quarter GAAP operating loss was $40.6 million, compared to $30.8 million in the second quarter of fiscal 2008. GAAP operating expenses were $59.2 million for the third quarter of 2008, as compared to $58.6 million for the second quarter of fiscal 2008. Pro Forma Q3 Results Pro forma revenue was $80.9 million in the third quarter of fiscal 2008, compared with $109.1 million in the second quarter of fiscal 2008. Backlog at the end of the third quarter of 2008 grew to $133.9 million compared to $95.8 million at the end of the second quarter of fiscal 2008, the highest backlog level in the past five quarters. "We are on track with growth in bookings, with much of the growth being attributable to significant wins and large long-term installations," said Kathy Lanterman, SGI Chief Financial Officer. "As we have said, our challenge is the revenue conversion cycle for these long-term orders, where revenue is not recognized for several months or quarters after we receive an order. We expect our operating results to improve as our growing backlog starts converting to revenue over the next two quarters." Pro forma revenue excludes the impact of fresh-start accounting and the deferral of the company's recognition of revenues for certain of the company's transactions where software is more than incidental to the overall solution pursuant to AICPA Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"). Pro forma gross margin for the third quarter, which is adjusted for similar items, was 26.9 percent compared with 35.7 percent in the second quarter of fiscal 2008. Pro forma operating expenses, which exclude restructuring and reorganization-related expenses, the non-cash impact of the acquisition of IP assets of Linux Networx, stock-based compensation expense and the impact of fresh start accounting, were $52.7 million in the third quarter of fiscal 2008 compared with $55.3 million in the second quarter of fiscal 2008. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of fiscal 2008, as defined in the company's debt agreements, were a loss of $25.7 million, compared with an $11.0 million loss for the second quarter of fiscal 2008. A reconciliation of the non-GAAP financial measures used in this press release to the company's GAAP results of operations, including an illustration of the impact of the company's fresh start accounting and the impact of the implementation of SOP 97-2, is also available at its Web site. Strong Start to Fourth Quarter SGI also reported that it has secured several major domestic and international wins during the fourth quarter to date. These included:

• NASA chose SGI to supply its next major supercomputer, a 20,480-core, 20TB SGI Altix ICE system, after a competitive evaluation the space agency launched last year. The new supercomputer will support NASA's aeronautics, science, space operations and space exploration initiatives, including its plan to resume manned missions to the moon and eventually manned exploration of Mars.
• SGI entered into a multi-year agreement with total contract payments to SGI expected to be more than $25M with a major national European supercomputing center to equip the institution with high-performance SGI computing and storage solutions. The systems will be used to drive multiple applications and manage massive amounts of data.
• SGI also will provide a large European weather service with an extensive data warehouse solution, which will run Oracle 10g and Oracle Clusterware. The solution incorporates SGI Altix 4700 and SGI Altix 450 servers, and will enable the weather service to analyze more than 30 years of meteorological data -- a challenge that represents 360 terabytes of user data.

"We believe this quarter's wins show significant momentum for SGI across multiple geographies and product lines," added Ewald. "Our ability to prevail in many exceptionally competitive sales situations shows that customers recognize the value of open-standards-based solutions that deliver superior price/performance and leading energy efficiency." Recent SGI Announcements

• Virtu VN200: A high density, highly scalable visualization system that can fully incorporate leading edge visualization capabilities into the full line of SGI Altix, SGI Altix XE and SGI Altix ICE servers.
• InfiniteStorage 4600: A new flagship RAID storage system that augments the InfiniteStorage product line and helps organizations meet the escalating bandwidth and I/O demands of today's performance-driven applications.
• Virtualized Storage Migration Solution: The new solution allows enterprises to choose the storage device that best suits their needs -- an advantage that can lead to better data utilization and significantly lower ownership costs. The new solution also allows enterprises to migrate data without disrupting operations.
• Climate Savers: SGI joined the Climate Savers Computing Initiative, a nonprofit group of consumers, businesses and conservation organizations dedicated to improving the power efficiency and reducing the energy consumption of computers.
• Support Solutions Plus: Through this new services support program, SGI provides a single, centralized contact for technical support, secured site management, and parts logistics requirements for many other vendors' products as well as SGI products.
• SGI Altix ICE enhancements: This quarter Altix ICE boasts new blade enclosures and blade options that increase the performance density of the platform by including improvements to memory, bandwidth and interconnect performance, and an enhanced cluster management environment, as well as make use of the next-generation InfiniBand chip technology.
• The NBA and SGI announced a multi-year extension of their relationship to expand the league's groundbreaking digital workflow and media management system, the NBA Digital Media Management System. The extended relationship will enable NBA to accelerate and double the historical digital archiving effort by ingesting 60,000 hours of video content each year.