GOVERNMENT

MOUNTAIN VIEW, CA -- SGI (NYSE: SGI) announced today that it has reached definitive agreement with NEC Corporation to create a strategic alliance that is expected to strengthen SGI's presence in the Japanese market. Under the alliance NEC, one of Japan's premier suppliers of information technology products, will acquire from SGI an interest in SGI Japan, Ltd., the subsidiary that supplies SGI equipment, services and solutions in Japan. SGI Japan will be converted from a wholly-owned SGI subsidiary to a company jointly owned by SGI, NEC and NEC's publicly-held affiliate, NEC Soft, Ltd. The name of the business will remain SGI Japan. ``NEC and SGI have collaborated extensively in the past with both government agency and education customers in Japan, especially through systems integration and project management related to high-performance computing,'' said Bob Bishop, chairman and CEO of SGI. ``We believe that our alliance with NEC will increase our market opportunity by opening doors for us not only in our core markets of science, education, manufacturing and entertainment but also in NEC's areas of strength. NEC has been a long-time partner of SGI as a supplier of microprocessors and other components, and our two companies know and respect each other. We are looking forward to this expanded relationship.'' ``SGI has advanced capability in the areas of visualization, scalability, and broadband which complements NEC's products and services,'' said Akinobu Kanasugi, Company President of NEC Solutions and Executive Vice President and Member of the Board, NEC. ``We believe that our alliance with SGI will create innovative solutions in high-performance computing and broadband areas by combining our mission critical technology with SGI's core competencies.'' ``The management and employees of SGI Japan are excited about this new chapter for SGI Japan,'' said Norio Izumi, president of SGI Japan. ``Over the past 15 years SGI Japan has become a key supplier to some of Japan's leading industrial companies, government agencies and universities. Our alliance with NEC and NEC Soft will allow us to build on this foundation and to address new opportunities for SGI systems and solutions.'' NEC will purchase a 40% interest and NEC Soft will purchase a 20% interest in SGI Japan from SGI for aggregate consideration of approximately $96 million, before settlement of intercompany amounts. As part of the alliance SGI and SGI Japan have entered into a long-term exclusive distribution arrangement for SGI products in Japan, and as such SGI Japan will obtain SGI trademark and intellectual property rights related to the business operations in Japan in accordance with standard business practice. SGI's yen denominated debt, which was incurred through SGI Japan and would otherwise have matured in December 2001, will also be restructured to mature in quarterly installments beginning in calendar 2002 and ending in March 2004. The transaction is expected to close in the current quarter. Following the transaction SGI will no longer consolidate SGI Japan in its financial statements but will instead record its sales to SGI Japan and its proportionate share of SGI Japan's earnings. SGI plans to provide updated financial guidance reflecting the impact of the transaction on its quarterly financials when the deal closes. However, SGI's objective of breaking even at the operating profit level in this quarter as discussed in its quarterly earnings conference call on Monday, October 22, 2001, remains unchanged.