SGI Reports Record Revenue and Profitability

SGI, a trusted leader in technical computing, today announced financial results for its second quarter of fiscal 2011.

The best quarter in its history

"SGI delivered the best quarter in its history. These record results underscore the success of our product strategy and execution, focus on operational excellence and commitment towards profitability," said SGI CEO Mark J. Barrenechea. "Given our business trends are improving, we are raising our FY11 non-GAAP revenue guidance and we expect to be profitable."

Starting in FY11, we have adopted new revenue recognition accounting standards. These new standards did not impact our non-GAAP results. For our FY11 Q2 GAAP results, $45.5 million of revenue and 440 basis points of gross margin were directly attributed to adoption of these new standards.

SGI, a trusted leader in technical computing, is focused on helping clients solve their most demanding business and research challenges. Visit www.sgi.com for more information.

The non-GAAP financial measures discussed in the text of this press release and accompanying non-GAAP supplemental information are financial measures used by SGI's management to evaluate the operating performance of the Company and to conduct its business operations. All non-GAAP financial measures discussed and presented in this press release excludes the revenue and associated costs of revenue deferred pursuant to this agreement Financial Accounting Standards Board, Accounting Standards Codification, and inventory step up arising from acquisition of substantially all the assets of Silicon Graphics, Inc. Non-GAAP operating expenses include Innovation and Development, Sales and Marketing and General Administrative expenses. Non-GAAP operating expenses exclude amortization of intangible assets, stock based compensation, restructuring and acquisition-related charges. Non-GAAP net income/(loss) per share excludes the same items as discussed above and, as then, the other-than-temporary impairment of equity investment and auction rate securities. Management presents non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management believes that the excluded charges are not central to the Company's core operating performance and uses the non-GAAP financial measures for planning purposes, including analysis of the Company's core operating performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management excludes from its non-GAAP financial measures the items cited above, whether or not recurring, to facilitate its review of the comparability of the Company's core operating performance on a period to period basis as then as to better understand the fundamental economics of a specific period's operational and financial performance. Management uses this view of the Company's operating performance for purposes of comparison with its business plan and individual operating budgets and allocations of resources. Management as well believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company's financial and operational performance in the same way that management evaluates SGI's financial performance. Nevertheless, these non-GAAP financial measures have limitations as an analytical tool, as they exclude the financial impact of transactions necessary or advisable for the conduct of the Company's business, just as the granting of equity compensation awards and are not intended to be an alternative to financial measures prepared pursuant to this agreement GAAP. Hence, to compensate for these limitations, management does not review these non-GAAP financial metrics in isolation from its GAAP results, nor should investors. Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between the Company's GAAP and non-GAAP financial results is provided at the end of this press release. Investors are advised to carefully review and consider this information also as the GAAP financial results that are disclosed in the Company's SEC filings.