http://www.mercurynews.com/mld/mercurynews/14528919.htm
Silicon Graphics, the legendary Silicon Valley company whose
supercomputers
created Hollywood special effects in the 1990s, said this morning
that it
has filed for bankruptcy protection.
The Mountain View company filed for bankruptcy under Chapter 11 of
the U.S.
bankruptcy code after reaching an agreement with its banks and
other bond
holders. Through its bankruptcy filing and reorganization plan, the
company
will reduce $250 million of its total debt.
``It was painful for us to have to make this decision, given the
effect it
has on shareholders, but we think it was a necessary step,'' said
SGI Chief
Executive Dennis McKenna in a phone interview. McKenna joined SGI
in January
as chairman and CEO to help turn the company around and return it to
profitability.
SGI, a developer of supercomputers used by NASA, oil companies and
other
clients, has stumbled in recent years as customers have turned to
cheaper
computer systems.
The bankruptcy filing only affects the company's U.S. operations. Its
non-U.S. subsidiaries in Europe, Canada, Mexico, South America and
Asia
Pacific were not included in the bankruptcy filing. McKenna said
SGI expects
to emerge from bankruptcy within six months.
``It's business as usual,'' McKenna said. ``We do not expect any
disruption
in our business. This is a pre-negotiated local process to allow us
to fix
the legacy cost structure of the company.''
For the past few months, SGI has ben looking at all its options,
including
holding discussions with potential buyers. But McKenna said that
while its
technology, customers and sales force were seen as major assets,
SGI's debt
position made it unattractive to possible acquirers.
As a result of the bankruptcy deal, SGI's shares, which are currently
trading in the over-the-counter market, will no longer trade and
have no
value. As of Friday, its shares were trading at 32 cents a share. In
November, the company's shares were de-listed from the New York Stock
Exchange after being unable to maintain a minimum share price of
$1.00 for
30 consecutive days.
McKenna said company executives will meet with employees this
morning. SGI
employs just over 1,800 people. He noted SGI recently announced
another
cost-cutting plan to save $50 million, but he did not know yet how
many jobs
may be lost. The plan seeks to consolidate some of the costs of SGI's
international entities.
As a result of the bankruptcy, McKenna said SGI will be owned by
several
large institutions that are converting their existing debt into
equity in
the company.
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