Silicon Valley pioneer Silicon Graphics may face bankruptcy or even a sale of the company if it fails in its 2006 restructuring plans, the company said this week.
In a 10Q regulatory document filed Feb. 8 with the Securities and Exchange Commission, the graphics pioneer said that it may run out of cash by the end of the year.
SGI valued its current assets at $452.1 million as of June 2005. By December 2005, the value of the assets had sunk to $397.3 million, a decrease of 12 percent.
The company retained AlixPartners LLC during the fourth quarter of 2005 to help oversee a turnaround plan, which involves corporate layoffs, estimated to have totaled about 1,000 employees; a reduction in procurement costs; closing one building of its corporate headquarters; and tight spending controls.
In January, Dennis McKenna was also named chairman of the board, chief executive officer and president, succeeding Robert Bishop, who remains on the board of directors and serves as vice chairman.
In its filing, however, SGI warned that “the new funds and our current sources of liquidity will only be adequate for our fiscal 2006 operating needs if our restructuring plan yields its anticipated savings and we meet the goals of our credit agreement for fiscal 2006. If we fail to achieve these objectives, we will likely consume additional cash in our operations, which would further impair our liquidity. If we are unable to achieve our objectives, we would consider alternatives for ensuring the continued operation of our business.”
These alternatives, SGI said, “could include further reductions in headcount and in the scope of our operations, generating cash from selling or licensing our intellectual property and seeking funding from marketing partners and government customers.”
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