Rackable to Buy SGI for $25 Million

Rackable is buying troubled SGI for $25 million in cash. Rackable's announcement came the same day that SGI filed for bankruptcy protection for the second time in three years. SGI made its name selling big, expensive propriety systems, but has struggled as the market shifted rapidly to industry-standard technologies, such as x86 servers powered by chips from AMD and Intel. SGI's attempts to revive its fortunes by shifting to such technologies had mixed results.

Rackable Systems is buying beleaguered systems maker SGI for about $25 million in cash.

The move, announced April 1, comes the same day that SGI filed for Chapter 11 protection for a second time in the past three years. SGI filed for bankruptcy protection in New York April 1, and the closing of the deal with Rackable is contingent upon a number of factors, including the approval of the bankruptcy court.

Officials with both companies expect the deal to close in about 60 days.

The deal will end a roller-coaster history for SGI, which made its name selling huge proprietary systems primarily into the HPC (high-performance computing) space but struggled as the industry moved to clusters of cheaper, x86 servers powered by Advanced Micro Devices and Intel. In recent years, the company has tried to make the shift to more industry-standard technology, including the use of Intel processors in its line of systems, and expanding its efforts in storage systems.

Most recently, SGI announced March 30 that it was offering Intel's new Nehalem EP chip for two-socket systems-officially known as the Xeon 5500 series-in its Altix ICE integrated blade platform.

SGI also shelved its legacy MIPS/Irix hardware in 2006 after coming out of bankruptcy.

Overall, results of the move into using more industry-standard technology were mixed. The company was delisted from the New York Stock Exchange in 2005 and later went into bankruptcy, emerging a year later.

Officials with Rackable, which makes server and storage products for midsize and large data centers, said the combination of the two companies will give businesses strong x86 offerings within large-scale cluster, HPC, cloud computing, data storage and visualization environments.

They also said the deal will enhance its global services capabilities.

"The combined company will be positioned to solve the most demanding business and technology challenges our customers confront today," Rackable President and CEO Mark J. Barrenechea said in a prepared statement. "In addition, this combination gives us the potential for significant operational synergies, a strong balance sheet, and positions the combined company for long-term growth and profitability."

SGI CEO Robert Ewald said the deal will be a good one for the company's customers.

"We have been working very hard to strengthen our company, and today, we've taken another big step in that direction," Ewald said in a prepared statement. "This transaction represents a compelling opportunity for Silicon Graphics' customers, partners and employees, who can all benefit from the emerging stronger company with better technologies, products and markets reach."