<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended SEPTEMBER 30,
2000.
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to .
COMMISSION FILE NUMBER 1-10441
SILICON GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2789662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 AMPHITHEATRE PKWY., MOUNTAIN VIEW, CALIFORNIA 94043-1351
(Address of principal executive offices) (Zip Code)
(650) 960-1980
(Registrant's telephone number, including area code)
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of November 3, 2000 there were 191,308,440
shares of Common Stock outstanding.
<PAGE>
SILICON GRAPHICS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations........................................................ 3
Condensed Consolidated Balance Sheets.................................................................. 4
Condensed Consolidated Statements of Cash Flows........................................................ 5
Notes to Condensed Consolidated Financial Statements................................................... 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition...................................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk ........................................... 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders................................................... 18
Item 6. Exhibits and Reports on Form 8-K...................................................................... 19
Signatures ................................................................................................... 20
Index to Exhibits ............................................................................................ 21
</TABLE>
TRADEMARKS USED IN THIS FORM 10-Q: Silicon Graphics, OCTANE, Onyx, O2 and
IRIX are registered trademarks and Origin, Onyx2 and SGI are trademarks of
Silicon Graphics, Inc. MIPS is a registered trademark of MIPS Technologies,
Inc. used under license by Silicon Graphics, Inc. UNIX is a registered
trademark in the United States and other countries, licensed exclusively
through X/Open Company Ltd. Windows NT is a registered trademark of Microsoft
Corporation. Intel is a registered trademark of Intel Corporation. Linux is a
registered trademark of Linus Torvalds in the U.S. and other countries. Red
Hat is a registered trademark of Red Hat, Inc.
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SILICON GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------------
2000 1999
----- ----
<S> <C> <C>
Product and other revenue............................ $ 279,999 $ 425,001
Service revenue...................................... 146,337 160,202
-------------- --------------
Total revenue................................... 426,336 585,203
Costs and expenses:
Cost of product and other revenue............... 166,907 312,178
Cost of service revenue......................... 116,218 129,085
Research and development........................ 57,349 85,350
Selling, general and administrative............. 185,663 228,360
Other operating expense (1)..................... (6,221) 144,538
---------------- ---------------
Total costs and expenses.................... 519,916 899,511
--------------- ---------------
Operating loss....................................... (93,580) (314,308)
Gain on sale of marketable investments .............. 38,805 --
Interest and other income (expense), net............. 9,303 (4,019)
--------------- ---------------
Loss before income taxes............................. (45,472) (318,327)
Income tax provision (benefit)....................... 3,516 (105,426)
--------------- ---------------
Net loss............................................. (48,988) (212,901)
Preferred stock dividend requirement................. (131) (131)
--------------- ---------------
Net loss available to common stockholders............ $ (49,119) $ (213,032)
=============== ===============
Net loss per share - basic and diluted............... $ (0.26) $ (1.17)
=============== ===============
Common shares outstanding - basic and diluted........ 187,872 181,924
=============== ===============
</TABLE>
(1) September 30, 2000 amount represents a change in previously estimated
restructuring costs and the September 30, 1999 amount represents a
charge for estimated restructuring costs.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
SILICON GRAPHICS, INC.
-3-
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000 (1)
---------------- --------------
(unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 192,857 $ 251,811
Short-term marketable investments 7,447 6,270
Accounts receivable, net 309,667 347,515
Inventories 169,723 181,594
Prepaid expenses and other current assets 84,032 133,119
------------ ----------
Total current assets 763,726 920,309
Restricted investments 104,380 126,408
Property and equipment, net 483,089 466,726
Other assets 282,646 325,768
------------ ----------
$1,633,841 $1,839,211
============ ==========
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 124,258 $ 147,366
Other current liabilities 585,266 714,162
------------ ----------
Total current liabilities 709,524 861,528
Long-term debt and other 403,895 385,133
Total stockholders' equity 520,422 592,550
------------ ----------
$1,633,841 $1,839,211
============ ==========
</TABLE>
(1) The balance sheet at June 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
-4-
<PAGE>
SILICON GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (48,988) $ (212,901)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization 31,558 54,483
Gain on sale of marketable investments (38,805) --
Gain on sale of Cray product line (11,753) --
Restructuring (6,221) 144,538
Other (4,543) (92,605)
Changes in operating assets and liabilities:
Accounts receivable 37,848 171,402
Inventories 13,156 (11,880)
Accounts payable (23,108) (36,847)
Other assets and liabilities (24,419) 8,254
------------ --------------
Total adjustments (26,287) 237,345
------------ --------------
Net cash (used in) provided by operating
activities (75,275) 24,444
Cash Flows From Investing Activities:
Short-term investments:
Purchases (1,177) (41,620)
Sales -- --
Maturities -- 12,005
Purchases of restricted investments (38,878) (101,502)
Proceeds from the maturities of restricted investments 60,906 94,226
Capital expenditures (41,397) (154,462)
Decrease in other assets 37,672 157
------------ --------------
Net cash provided by (used in) investing
activities 17,126 (191,196)
Cash Flows From Financing Activities:
Payments of debt principal (1,822) (1,859)
Sale of SGI common stock 1,148 13,941
Repurchase of SGI common stock -- (24,420)
Cash dividends-preferred stock (131) (131)
------------ --------------
Net cash used in investing activities (805) (12,469)
------------ --------------
Net decrease in cash and cash equivalents (58,954) (179,221)
Cash and cash equivalents at beginning of period 251,811 571,117
------------ --------------
Cash and cash equivalents at end of period $ 192,857 $ 396,896
============ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
-5-
<PAGE>
SILICON GRAPHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS.
The consolidated financial statements include the accounts of SGI and our
wholly-owned subsidiaries. The unaudited results of operations for
the interim periods shown herein are not necessarily indicative of operating
results for the entire fiscal year. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the financial position, results of operations and cash flows for all
periods presented have been made. The unaudited condensed consolidated financial
statements included in this Form 10-Q should be read in conjunction with the
audited consolidated financial statements and notes thereto for the fiscal year
ended June 30, 2000.
2. INVENTORIES.
<TABLE>
<CAPTION>
(In thousands) September 30, 2000 June 30, 2000
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Components and subassemblies $ 37,898 $ 38,855
Work-in-process 42,732 50,051
Finished goods 37,568 45,896
Demonstration systems 51,525 46,792
-------- --------
Total inventories $169,723 $181,594
======== ========
</TABLE>
3. RESTRICTED INVESTMENTS.
Restricted investments consist of long-term investments pledged as collateral
against letters of credit and an equity forward purchase arrangement. Restricted
investments are held in the Company's name by major financial institutions.
4. PROPERTY AND EQUIPMENT.
<TABLE>
<CAPTION>
(In thousands) September 30, 2000 June 30, 2000
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Property and equipment, at cost $1,077,980 $1,050,991
Accumulated depreciation and amortization (594,891) (584,265)
---------- ----------
Property and equipment, net $ 483,089 $ 466,726
========== ==========
</TABLE>
5. OTHER ASSETS.
<TABLE>
<CAPTION>
(In thousands) September 30, 2000 June 30, 2000
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments $108,311 $152,642
Spare parts 99,605 98,601
Software licenses, goodwill and other 74,730 74,525
---------- ----------
$282,646 $325,768
========== ==========
</TABLE>
-6-
<PAGE>
6. RESTRUCTURING AND RELATED CHARGES.
During the first quarter of fiscal 2000, we announced and began to implement
restructuring actions that resulted in aggregate charges of $145 million.
These charges included $65.8 million for the elimination of approximately
1,100 positions across essentially all of our functions and locations. We
also recorded operating asset write downs of $26.6 million for fixed assets
and evaluation units, prepaid license agreements and other intangible assets
associated with the end of life of our Silicon Graphics 320 and 540 visual
workstations and certain high-end graphics development projects that were
canceled. Third party contract cancellation charges associated with the above
actions totaled $8.5 million. We planned to vacate approximately 1,500,000
square feet of leased sales and administrative facilities throughout the
world, with lease terms expiring through fiscal 2004. We estimated this would
require ongoing lease payments of $26 million until subleases could be
arranged, abandoning $11 million of leasehold improvements and other fixed
assets and incurring $7 million in exit costs, including costs to restore
facilities to original condition.
During the second through fourth quarters of fiscal 2000, we lowered our
estimate of the total costs associated with the fiscal 2000 restructuring
activities described above. As a result, a cumulative adjustment of
approximately $35 million was recorded in fiscal 2000. The adjustment primarily
reflected far more favorable settlements of lease obligations attributable to
extremely high demand for facilities in Mountain View, California. It also
reflected our new approach to structuring our field organization. The adjustment
further reflected lower than estimated severance and related charges due to
higher than expected attrition and lower per person costs. We now estimate that
there will be 900 involuntary employee terminations associated with the fiscal
2000 restructuring activity. Estimated costs of contract cancellations were also
adjusted due to favorable settlements.
During the first quarter of fiscal 2001, we again lowered our estimate of the
total costs associated with the fiscal 2000 restructuring activities and
recorded an adjustment of $6 million. The adjustment primarily reflects lower
than estimated facilities closure costs due to negotiating better than
anticipated sublease arrangements. The adjustment also reflects lower than
estimated severance and related charges attributable to higher than expected
attrition and lower per person costs. As of September 30, 2000, substantially
all of the estimated 900 positions have been eliminated. All remaining severance
related charges are expected to be paid by December 31, 2000. The remaining
facilities related accrual balance of approximately $4 million at September 30,
2000 is expected to result in cash expenditures through fiscal 2004.
The following table depicts the restructuring activity during the first three
months of fiscal 2001:
<TABLE>
<CAPTION>
Severance
and Related Vacated
Category Charges Facilities Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at June 30, 2000 $ 3,265 $ 6,440 $ 9,705
Adjustments:
Decrease (2,590) (3,631) (6,221)
Increase -- 3,619 3,619
Expenditures:
Cash (345) (1,990) (2,335)
Non-cash -- (756) (756)
-------------------------------------
Balance at September 30, 2000 $ 330 $ 3,682 $ 4,012
=====================================
</TABLE>
-7-
<PAGE>
7. EARNINGS PER SHARE.
The following table sets forth the computation of basic and diluted loss per
share:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------
(In thousands, except per share amounts) 2000 1999
------------------------------------------------------ ---------------- ---------------
<S> <C> <C>
Net loss $ (48,988) $ (212,901)
Less preferred stock dividends (131) (131)
------------- -------------
Net loss available to common stockholders $ (49,119) $ (213,032)
============ ===========
Weighted average shares
outstanding - basic and diluted 187,872 181,924
============ ===========
Net loss per share - basic and diluted $ (0.26) $ (1.17)
============ ===========
Potentially dilutive securities excluded from
computations because they are anti-dilutive 13,563 12,087
============ ===========
</TABLE>
8. COMPREHENSIVE LOSS.
The components of comprehensive loss, net of tax, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------------
(In thousands) 2000 1999
---------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Net loss $ (48,988) $ (212,901)
Change in unrealized gain (loss) on available-for-sale investments (753) 91
Reclassification adjustment of accumulated unrealized gain
related to the sale of investments (24,450) --
Change in unrealized gain on derivative instruments designated and
qualifying as cash flow hedges 4,347 606
Foreign currency translation adjustments (3,868) 10,011
----------- -----------
Comprehensive loss $ (73,712) $ (202,193)
=========== ===========
</TABLE>
The components of accumulated other comprehensive income (loss), net of tax, are
as follows:
<TABLE>
<CAPTION>
September 30, June 30,
(In thousands) 2000 2000
---------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Unrealized gain on available-for-sale investments $ 5,496 $ 30,699
Unrealized gain (loss) on derivative instruments designated
and qualifying as cash flow hedges 1,686 (2,661)
Foreign currency translation adjustments (13,340) (9,472)
---------- ---------
Accumulated other comprehensive income (loss) $ (6,158) $ 18,566
========== =========
</TABLE>
-8-
<PAGE>
9. SEGMENT INFORMATION.
SGI is a leader in high-performance computing and advanced graphics
solutions, offering powerful servers and visual workstations. We have three
reportable segments: Servers, Visual Workstations and Global Services.
Reportable segments are determined based on several factors including
customer base, homogeneity of products, technology, delivery channels and
other factors. The Server segment's current products include Silicon
Graphics-Registered Trademark- Onyx2-Registered Trademark- and the next
generation Onyx 3000 family of graphics systems, the SGI-TM- Origin-TM- 200
family of servers, the SGI-TM- 1000 family of servers and the Origin-TM- 2000
and the next generation Origin-TM- 3000 family of high-performance servers.
Fiscal 2000 results include the Cray product line which was sold to Tera
Computer Company ("Tera") in the third quarter of fiscal 2000. The Visual
Workstation segment's current products include the Silicon
Graphics-Registered Trademark- O2-Registered Trademark- and Silicon
Graphics-Registered Trademark- Octane-Registered Trademark- visual
workstations based upon the MIPS-Registered Trademark- microprocessor and the
IRIX-Registered Trademark- operating system and the Silicon
Graphics-Registered Trademark- 230, 330 and 550 visual workstations based
upon the Intel mircoprocessor and the Windows NT and Red Hat-Registered
Trademark- Linux operating systems. Fiscal 2000 results include the Silicon
Graphics 320 and Silicon Graphics 540 visual workstations based upon the
Intel-Registered Trademark- microprocessor and the Windows NT-Registered
Trademark- operating system which were discontinued in favor of more industry
standard architectures. The Global Services segment supports our computer
hardware and software products and provides professional services to help
customers realize the full value of their information technology investments.
Our professional services organization provides technology consulting,
education, communication and entertainment services. We evaluate performance
for each of these segments based on profit or loss from operations before
interest and taxes.
In addition to the aforementioned reportable segments, expenses of the sales and
marketing, manufacturing, finance and administration groups are allocated to the
operating units and are included in the results reported. The revenue and
related expenses of our wholly-owned software subsidiary Alias|Wavefront, as
well as certain corporate-level operating expenses are not allocated to
operating units and are included in "Other" in the reconciliation of reported
revenue and operating profit. In addition, the revenue and related expenses of
MIPS, a designer of high-performance processors and related intellectual
property that was a majority-owned subsidiary until SGI distributed its interest
in MIPS to its shareholders through a spin-off effective June 20, 2000, are also
included in "Other" in the reconciliation of reported revenue and operating
profit.
We do not identify or allocate assets or depreciation by operating segment, nor
do we evaluate segments on these criteria. Operating units do not sell product
to each other, and accordingly, there is no inter-segment revenue to be
reported.
Information on reportable segments is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30,
Visual Global
Servers Workstations Services
------------------------------------------------------ ------------------ --------------- ---------------
<S> <C> <C> <C>
2000:
Revenue from external customers $ 145,792 $ 96,142 $ 161,238
Segment profit (loss) $ (72,019) $ (30,727) $ 2,301
------------------------------------------------------ ------------------ --------------- ---------------
1999:
Revenue from external customers $ 214,893 $ 160,035 $ 166,084
Segment profit (loss) $ (56,586) $ (113,710) $ (6,546)
Significant item:
Non-recurring charges for contract cancellations and
inventory and future support costs related to
the Silicon Graphics 320 and 540 visual
workstations $ -- $ (65,790) $ (19,750)
------------------------------------------------------ ------------------ --------------- ---------------
</TABLE>
-9-
<PAGE>
Reconciliation to SGI as reported (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------------
2000 1999
------------------------------------------------------ ----------------- ---------------
<S> <C> <C>
REVENUE:
Total reportable segments $ 403,172 $ 541,012
Other 23,164 44,191
----------------- ---------------
Total SGI consolidated $ 426,336 $ 585,203
================= ===============
OPERATING PROFIT (LOSS):
Total reportable segments $ (100,445) $ (176,842)
Other 644 7,072
Restructuring 6,221 (144,538)
----------------- ---------------
Total SGI consolidated $ (93,580) $ (314,308)
================= ===============
</TABLE>
10. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"), and
amended it in March and June 2000. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements for all public
registrants. Changes in our revenue recognition policy, if any, resulting from
the interpretation of SAB 101 would be reported as a change in accounting
principle. We are currently reviewing the impact of SAB 101 on our previously
reported results of operations and anticipate that we will adopt SAB 101 during
the fourth quarter of fiscal 2001.
11. CONTINGENCIES.
We are defending the lawsuits described below. We believe we have good defenses
to the claims in each of these lawsuits and we are defending each of them
vigorously.
We are defending putative securities class action lawsuits filed in the U.S.
District Court for the Northern District of California and in California
Superior Court for the County of Santa Clara in December 1997 and January 1998
alleging that SGI and certain of its officers made material misrepresentations
and omissions during the period from July to October 1997. The U.S. District
Court is considering plaintiffs' motion for a voluntary dismissal of the case
without prejudice and defendants' motion for partial summary judgment. Discovery
is proceeding in the California Superior Court case.
We are also defending a securities class action lawsuit involving Alias Research
Inc., which we acquired in June 1995. The Alias case, which was filed in 1991 in
the U.S. District Court for the District of Connecticut, alleges that Alias and
a former officer and director made material misrepresentations and omissions
during the period from May 1991 to April 1992. The case has been remanded to the
U.S. District Court and is proceeding through discovery.
The U.S. Departments of Commerce and Justice are currently conducting civil and
criminal investigations into SGI's compliance with export regulations in
connection with several export sales to Tier 3 countries. See "Risks That Affect
Our Business - Export Regulation."
We routinely receive communications from third parties asserting patent or other
rights covering our products and technologies. Based upon our evaluation, we may
take no action or we may seek to obtain a license. There can be no assurance in
any given case that a license will be available on terms we consider reasonable,
or that litigation will not ensue.
We are not aware of any pending disputes, including those described above, that
would be likely to have a material adverse effect on SGI's financial condition,
results of operations or liquidity. However, our evaluation of the likely impact
of these pending disputes could change in the future.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Quarterly Report on Form 10-Q includes forward-looking statements regarding
our business, objectives, financial condition and future performance. These
forward-looking statements include, among others, statements relating to
expected levels of revenue, gross margin, operating expense, and future
profitability, our business transition objectives, headcount reductions and the
expected impact on our business of legal proceedings and government regulatory
actions. We have based these forward-looking statements on our current
expectations about future events. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed or implied
in such forward looking statements. Such risks and uncertainties include, among
other things: adverse changes in general economic or business conditions;
adverse changes in the specific markets for our products, including expected
rates of growth and decline in our current markets; adverse business conditions;
changes in customer order patterns; the impact of employee attrition rates;
heightened competition, reflecting rapid technological advances and constantly
improving price/performance, which may result in significant discounting and
lower gross profit margins; continued success in technological advancements and
new product introduction, including timely development and successful
introduction of strategic products for specific markets; inability to
effectively implement our visual workstation and server strategy, including the
development of appropriate distribution, marketing and customer support models;
risks related to dependence on our partners and suppliers; risks related to
foreign operations (including the downturn of economic trends, unfavorable
currency movements, and export compliance issues); risks associated with
implementation of our new business practices, processes and information systems;
litigation involving export compliance, intellectual property or other issues;
and other factors including those listed under the heading "Risks That Affect
Our Business."
We undertake no obligation to publicly update or revise any forward looking
statements, whether changes occur as a result of new information, future events
or otherwise. The matters addressed in this discussion, with the exception of
the historical information presented, are forward-looking statements involving
risks and uncertainties, including business transition and other risks discussed
under the heading "Risks That Affect Our Business" and elsewhere in this report.
Our actual results may differ significantly from the results discussed in the
forward-looking statements.
The following tables and discussion present certain financial information on a
comparative basis. During the third and fourth quarters of fiscal 2000,
respectively, we sold our Cray product line and distributed our remaining
interest in MIPS Technologies, Inc. ("MTI") through a spin-off. We believe it
more relevant if certain current fiscal year results (revenue, gross margin and
operating expenses other than restructuring activity) are compared with pro
forma fiscal 2000 results. The pro forma results for the first quarter of fiscal
2000 used throughout this discussion are adjusted to exclude the results of
operations of the Cray product line and MIPS.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS Pro Forma Three
Three Months Ended Months Ended
(Numbers may not add due to rounding) September 30, September 30,
---------------------------------------------- ----------- ------------ --------------------
$ in millions, except per share amounts 2000 1999 1999
---------------------------------------------- ----------- ------------ --------------------
<S> <C> <C> <C>
Total revenue $ 426 $ 585 $ 514
Cost of revenue 283 441 408
---------------------------------------------- ----------- ------------ --------------------
Gross profit 143 144 106
Gross profit margin 33.6 % 24.6 % 20.5 %
Total operating expenses 237 458 436
---------------------------------------------- ----------- ------------ --------------------
Operating loss (94) (314) (330)
Interest and other income (expense), net 48 (4) (2)
---------------------------------------------- ----------- ------------ --------------------
Loss before income taxes (45) (318) (333)
---------------------------------------------- ----------- ------------ --------------------
Net loss $ (49) $ (213) $ (224)
---------------------------------------------- ----------- ------------ --------------------
Net loss per share - basic and diluted $(0.26) $(1.17) $(1.23)
---------------------------------------------- ----------- ------------ --------------------
</TABLE>
-11-
<PAGE>
REVENUE
The following discussion of revenue is based on the results of our reportable
segments as described in Note 9 to the Condensed Consolidated Financial
Statements. Total revenue is principally derived from three reportable segments:
Servers, Visual Workstations and Global Services. These segments were determined
based on factors such as customer base, homogeneity of products, technology,
delivery channels and other factors.
Revenue for the first quarter of fiscal 2001 decreased $88 million or 17%
compared with pro forma revenue for the first quarter of fiscal 2000.
The following table presents total revenue by reportable segment:
<TABLE>
<CAPTION>
Pro Froma Three
Three Months Ended Months Ended
September 30, September 30,
----------------------------- --------------------- ------------------
$ in millions 2000 1999 1999
----------------------------- ----------- --------- ------------------
<S> <C> <C> <C>
Servers $ 146 $ 215 $ 191
% of total revenue 34% 37% 37%
Visual Workstations $ 96 $ 160 $ 160
% of total revenue 23% 27% 31%
Global Services $ 161 $ 166 $ 138
% of total revenue 38% 28% 27%
Other $ 23 $ 44 $ 25
% of total revenue 5% 8% 5%
----------------------------- ----------- --------- ------------------
</TABLE>
Server revenue for the first quarter of fiscal 2001 decreased $45 million or 23%
compared with pro forma server revenue for the first quarter of fiscal 2000. The
decrease reflects the effects on revenue of industry-wide shortages of
components used in our newly introduced Origin 3000 family of high-performance
servers and Onyx 3000 family of graphics systems. We experienced significant
constraints on our ability to ship orders received from customers for these
products principally due to insufficient wafer starts and limited availability
of the industry-standard ceramic packaging used by our supplier of custom ASICs.
Visual Workstation revenue for the first quarter of fiscal 2001 decreased $64
million or 40% compared with pro forma Visual Workstation revenue for the
first quarter of fiscal 2000. This decrease reflects the effects of strong
competition in the shrinking UNIX-Registered Trademark- workstation market
and a product transition from the Silicon Graphics 320 and 540 visual
workstations included in the first quarter of fiscal 2000 to our newly
introduced family of products based on the Intel microprocessor which has not
yet ramped to its target revenue levels. Configurations of the Octane2-TM-
graphics workstation were also affected by the component shortages described
above.
Global Services revenue, which is comprised of hardware and software support and
maintenance, professional services and remanufactured systems sales, increased
$23 million or 17% for the first quarter of fiscal 2001 compared with the first
quarter of fiscal 2000 on a pro forma basis. This increase primarily reflects an
increase in professional services revenue and remanufactured systems sales,
offset in part by a decline in our traditional customer support revenue.
Other revenue is principally comprised of our operating units that are not
reportable segments, including the product and service revenue of our software
subsidiary, Alias|Wavefront.
-12-
<PAGE>
Total revenue by geographic area was as follows (in millions):
<TABLE>
<CAPTION>
Pro Forma Three
Three Months Ended Months Ended
September 30, September 30,
--------------------- --------------------- ------------------
Area 2000 1999 1999
--------------------- ------------ -------- ------------------
<S> <C> <C> <C>
Americas $ 246 $ 351 $ 318
Europe 97 150 128
Rest of World 83 84 68
--------------------- ------------ -------- ------------------
Total revenue $ 426 $ 585 $ 514
--------------------- ------------ -------- ------------------
</TABLE>
Geographic revenue as a percentage of total revenue was as follows:
<TABLE>
Pro Forma Three
Three Months Ended Months Ended
September 30, September 30,
--------------------- --------------------- ------------------
Area 2000 1999 1999
--------------------- ------------ -------- ------------------
<S> <C> <C> <C>
Americas 58% 60% 62%
Europe 23% 26% 25%
Rest of World 19% 14% 13%
--------------------- ------------ -------- ------------------
</TABLE>
The decrease in Americas business as a percentage of total revenue in the first
quarter of fiscal 2001 compared with the corresponding period of fiscal 2000 on
a pro forma basis is primarily due to a decline in high-performance servers and
graphics systems revenue which was impacted by component shortages, and to a
lesser extent the effects of strong competition in the shrinking UNIX
workstation market, offset in part by an increase in professional services and
traditional customer support revenue. The decrease in business in Europe as a
percentage of total revenue in the first quarter of fiscal 2001 compared with
the corresponding period of fiscal 2000 on a pro forma basis primarily reflects
the effects of strong competition in the shrinking UNIX workstation market. The
increase in Rest of World business as a percentage of total revenue in the first
quarter of fiscal 2001 compared with the corresponding period of fiscal 2000 on
a pro forma basis is principally due to an increase in professional services
revenue in Japan.
Our consolidated backlog at September 30, 2000 was $366 million compared with
$298 million at June 30, 2000. The increase is primarily due to material
shortages of wafer-starts and the ceramic packaging for many of our custom ASICS
that impacted our ability to ship new products which contain these components.
GROSS PROFIT MARGIN
Cost of product and other revenue includes costs related to product shipments,
including materials, labor, overhead and other direct or allocated costs
involved in their manufacture or delivery. Costs associated with non-recurring
engineering revenue are included in research and development expense. Cost of
service revenue includes all costs incurred in the support and maintenance of
our products, as well as costs to deliver professional services.
Our overall gross profit margin increased to 33.6% in the first quarter of
fiscal 2001 compared with pro forma gross profit margin of 20.5% in the first
quarter of fiscal 2000. Pro forma gross profit margin for the first quarter of
fiscal 2000 included certain adjustments related to our decision to discontinue
the Silicon Graphics 320 and 540 visual workstations product family. We charged
cost of product and other revenues approximately $40 million for third party
manufacturing contract cancellations and purchase commitments and $25 million
for excess product and demonstration inventory. We also charged $20 million to
cost of service revenue for future unrecoverable support costs. Without these
adjustments, our first quarter fiscal 2000 adjusted pro forma gross profit
margin would have been 37.2%. Gross profit margin of 33.6% for the first quarter
of fiscal 2001 decreased 3.6 percentage points compared with the adjusted pro
forma gross profit margin for the first quarter of fiscal 2000. This 3.6
percentage point decline in gross profit margin principally reflects the effect
of component shortages on high-end, high gross profit margin systems,
particularly on the new products within our Origin scalable server and Onyx
graphics systems businesses. Despite the impact that decreased volumes and
continuing pricing pressures in both the Server and Visual Workstation segments,
-13-
<PAGE>
as well as in our Global Services business has had on gross profit margin, we
have been able to partially mitigate these effects by consolidation and
outsourcing of certain manufacturing operations and continued improvements in
manufacturing efficiencies and procurement practices.
<TABLE>
<CAPTION>
OPERATING EXPENSES Pro Forma Three
Three Months Ended Months Ended
September 30, September 30,
------------------------------------- --------------------- ---------------------
$ in millions 2000 1999 1999
------------------------------------- ----------- --------- ---------------------
<S> <C> <C> <C>
Research and development $ 57 $ 85 $ 70
% of total revenue 13.5 % 14.6% 13.6%
Selling, general and administrative $ 186 $ 228 $ 221
% of total revenue 43.5 % 39.0% 43.1%
Other $ (6) $ 145 $ 145
% of total revenue (1.5)% 24.7% 28.1%
------------------------------------- ----------- --------- ---------------------
</TABLE>
OPERATING EXPENSE (EXCLUDING OTHER OPERATING EXPENSE). Operating expense for
the first quarter of fiscal 2001 declined 17% in absolute dollars, and, as a
percentage of total revenue, remained flat at 57.0% compared with pro forma
operating expense for the first quarter of fiscal 2000. The decrease in
operating expense resulted primarily from lower headcount as a result of
restructuring activities and attrition. In addition, concentrated research
and development spending, management focus on expense control and lower
outside services expense contributed to the decline in operating expense year
over year. We currently expect that operating expense will remain flat in the
second quarter of fiscal 2001 and then decline on a quarterly basis in the
second half of fiscal 2001.
OTHER OPERATING EXPENSE. Other operating expense for the first quarter of fiscal
2001 represents a $6 million reduction to the restructuring costs we estimated
during the first quarter of fiscal 2000. Other operating expense for the first
quarter of fiscal 2000 represents a charge for estimated restructuring costs of
$145 million. See Note 6 to the Condensed Consolidated Financial Statements,
"Restructuring and Related Charges," for further information regarding these
activities.
INTEREST AND OTHER
INTEREST EXPENSE Interest expense for the first quarter of fiscal 2001 remained
relatively consistent compared with the first quarter of fiscal 2000.
INTEREST INCOME AND OTHER, NET Interest income and other, net includes interest
on our cash investments, gains and losses on other investments, and other
non-operating items. Interest income and other, net for the first quarter of
fiscal 2001 increased $50 million compared with the first quarter of fiscal 2000
on a pro forma basis. Interest income on our cash investments decreased
approximately $5 million year over year due to lower cash balances. The increase
in interest and other income, net for the first quarter of fiscal 2001 was
primarily due to a $39 million gain on the sale of marketable investments and a
$12 million gain related to the sale of the Cray product line.
TAXES Our provision for income taxes for the first quarter of fiscal 2001 arose
principally from taxes currently payable in foreign jurisdictions. The effective
tax benefit rate for the first quarter for fiscal 2000 was 23%, excluding the
impact of the $86 million charge related to the Silicon Graphics 320 and 540
visual workstation product line and the $145 million charge for estimated
restructuring costs, which were tax effected at 37%. The fiscal 2000 benefit
rate, excluding the charges related to the Silicon Graphics 320 and 540 products
and estimated restructuring charges, differed from the federal statutory rate
primarily due to foreign losses for which no benefit was recognized.
FINANCIAL CONDITION
At September 30, 2000, cash and cash equivalents and marketable and restricted
investments totaled $305 million, down from $384 million at June 30, 2000.
Included in the September 30, 2000 and June 30, 2000 balances are approximately
$104 million and $126 million, respectively, of restricted investments that
serve as collateral for letters of credit and an equity forward purchase
arrangement.
-14-
<PAGE>
Operating activities used $75 million during the first quarter of fiscal 2001
compared with provided $24 million during the first quarter of fiscal 2000. To
present cash flows from operating activities, net loss for the first quarter of
fiscal year 2001 was adjusted for certain significant items. The first quarter
of fiscal year 2001 net loss is adjusted to remove the impact of the $39 million
gain on the sale of marketable investments that is reflected as a cash flow from
investing activities. The negative operating cash flow was partially offset by a
decrease in accounts receivable attributable to lower revenue levels.
Investing activities, other than changes in available-for-sale and restricted
investments, consumed $4 million in cash during the first quarter of fiscal 2001
compared with $154 million in the first quarter of fiscal 2000. Capital
expenditures of $41 million were the principal investing activity during the
first quarter of fiscal 2001. This outflow was partially offset by proceeds of
$43 million on the sale of marketable investments. The principal investing
activity in the first quarter of fiscal 2000 is attributable to our election to
exercise an option to purchase five buildings on our Mountain View campus for
approximately $125 million that had been held under an off-balance sheet
financing arrangement.
Financing activities used $1 million during the first quarter of fiscal 2001
compared with $12 million during the first quarter of fiscal of 2000. The
principal financing activities during the first quarter of fiscal 2001 included
the use of $2 million for debt payments, offset in part by proceeds from the
issuance of stock. The principal financing activities during the first quarter
of fiscal 2000 included the use of $24 million to repurchase shares of our
common stock, offset in part by proceeds from employee stock option exercises.
At September 30, 2000, our principal sources of liquidity included cash and cash
equivalents and marketable investments of $200 million. We believe that these
principal sources of liquidity, along with cash generated from operations and
the sale or refinance of certain non-strategic assets such as real estate,
should be adequate to fund our projected cash flow needs. We believe that the
level of financial resources is an important competitive factor in the computer
industry, and accordingly, we may elect to raise additional capital through debt
or equity financing or the sale of other selected assets in anticipation of
future needs.
RISKS THAT AFFECT OUR BUSINESS
SGI operates in a rapidly changing environment that involves a number of risks,
some of which are beyond our control. This discussion highlights some of these
risks.
BUSINESS TRANSITION. SGI has had declining revenue and has been unprofitable
on an operating basis for each of the past three fiscal years. Our plan to
restore growth and profitability will require significant transitions in
product strategy and in operating expenses. We have announced product
roadmaps for both the server and workstation businesses that will, over the
next five years, supplement our products based on the MIPS processor
architecture with products based on the Intel processor architecture, and
from the IRIX operating system to Linux-Registered Trademark- and Windows NT.
This process will involve our supporting both architectures indefinitely in
order to provide flexibility and support to our customers. Risks associated
with this strategy include uncertainty among employees, customers and
partners, potential customer defection and higher operating expenses. There
can be no assurance that we will introduce the new products required for
these transitions as planned, successfully support our customer and partner
base as they adopt these new products or otherwise manage this process in a
way that will allow us to recover from this uncertainty.
NEW PRODUCTS. In the last quarter of fiscal 2000 and the first quarter of
2001 we introduced major new products in every segment of our computer system
business, including the Origin 3000 family of high-performance servers, new
graphics subsystems both in the visual workstation and Onyx high-performance
graphics systems families, and new Intel processor-based workstations and
servers. Our ability to meet our objectives for fiscal 2001 is highly
dependent on the success of these new products, and on our success in ramping
these new products to commercial volumes as scheduled. Our first quarter
results suffered from various industry-wide and world-wide supply
constraints, including, in particular constraints on the ceramic packaging
for ASICs that are critical components of our systems. We are working with
our suppliers to resolve these supply issues, but we cannot be assured that
we will receive sufficient supplies at the delivery dates that will enable us
to meet our objectives for the second quarter and beyond. Any extended
failure to meet these objectives could affect not only our ability to ship
our backlog but to continue to attract new orders.
-15-
<PAGE>
EXPENSE REDUCTION PROGRAM. While our operating expenses, excluding other
operating expenses, have declined from $1.5 billion in fiscal 1998 to $1.3
billion in fiscal 1999 and to $1.1 billion in fiscal 2000, our expenses remain
out of line with our revenues. We expect that we will be designing and
implementing global systems for Enterprise Resource Planning and Customer
Relationship Management, improving the efficiency of related business processes,
and taking other additional steps in fiscal 2001 to address this issue. While
our objective is to reduce our costs in ways that will not have a material
impact on revenue levels, there is no assurance that this will be achieved.
DEPENDENCE ON PARTNERS AND SUPPLIERS. Our business has always involved close
collaboration with partners and suppliers. However, many elements of our current
business strategy, including the longer-term transition to the Intel
architecture and additional outsourcing of manufacturing, will increase our
dependence on Intel and other partners, and on our manufacturing partners and
other component suppliers. Our business could be adversely affected, for
example, if Intel fails to meet product release schedules, if we experience
supply constraints such as those that currently exist, or if we experience any
other interruption in the supply chain. The competitiveness of our system
products, particularly our servers, is significantly affected by the
availability on our platform of third-party software applications that are
important to customers in our target markets. Our ability to work with our
software partners to ensure porting of these applications to our IRIX operating
system and, in the future, to Linux, is a key factor to our business success.
EMPLOYEES. Our success depends on our ability to continue to attract, retain and
motivate highly qualified technical, marketing and management personnel, who are
in great demand. The uncertainties surrounding SGI's business prospects have
increased the challenges of retaining world-class talent. We have initiated
hiring and retention programs to attract and retain key employees, but there is
no assurance that these programs will succeed.
PRODUCT DEVELOPMENT AND INTRODUCTION. Our continued success depends on our
ability to develop and rapidly bring to market technologically complex and
innovative products. Product transitions are a recurring part of our business. A
number of risks are inherent in this process.
The development of new technology and products is increasingly complex and
uncertain, which increases the risk of delays. The introduction of a new
computer system requires close collaboration and continued technological
advancement involving multiple hardware and software design teams, internal and
external manufacturing teams, outside suppliers of key components such as
semiconductor and storage products and outsourced manufacturing partners. The
failure of any one of these elements could cause our new products to fail to
meet specifications or to miss the aggressive timetables that we establish.
There is no assurance that acceptance of our new systems will not be affected by
delays in this process. As noted above, our ability to successfully attract and
retain key technical, marketing and management personnel in a competitive hiring
environment has a direct impact on our ability to maintain our product
development timetables.
Short product life cycles place a premium on our ability to manage the
transition to new products. We often announce new products in the early part of
a quarter while the product is in the final stages of development, and seek to
manufacture and ship the product in volume during the same quarter. Our results
could be adversely affected by such factors as development delays, the release
of products to manufacturing late in any quarter, quality or yield problems
experienced by suppliers, variations in product costs and excess inventories of
older products and components. In addition, some customers may delay purchasing
existing products in anticipation of new product introductions.
PERIOD TO PERIOD FLUCTUATIONS. Our operating results may fluctuate for a number
of reasons. Delivery cycles are typically short, other than for large-scale
server products. A little over half of each quarter's product revenue results
from orders booked and shipped during the third month, and disproportionately in
the latter half of that month. These factors make the forecasting of revenue
inherently uncertain. Because we plan our operating expenses, many of which are
relatively fixed in the short term, on expected revenue, even a relatively small
revenue shortfall may cause a period's results to be substantially below
expectations. Such a revenue shortfall could arise from any number of factors,
including lower than expected demand, supply constraints, delays in the
availability of new products, transit interruptions, overall economic conditions
or natural disasters. Demand can also be adversely affected by product and
technology transition announcements by SGI or our competitors. The timing of
customer acceptance of certain large-scale server products may also have a
significant effect on periodic operating results. Margins are heavily influenced
by mix considerations, including geographic concentrations, the mix of product
and service revenue, and the mix of server and desktop product revenue including
the mix of configurations within these product categories.
-16-
<PAGE>
Our results have typically followed a seasonal pattern, with stronger sequential
growth in the second and fourth fiscal quarters, reflecting the buying patterns
of our customers.
Our stock price, like that of other technology companies, is subject to
significant volatility. If revenue or earnings in any quarter fail to meet the
investment community's expectations, there could be an immediate impact on our
stock price. The stock price may also be affected by broader market trends
unrelated to our performance.
COMPETITION. The computer industry is highly competitive, with rapid
technological advances and constantly improving price/performance. Most of our
competitors have substantially greater technical, marketing and financial
resources and, in some segments, a larger installed base of customers and a
wider range of available applications software. Competition may result in
significant discounting and lower gross margins.
IMPACT OF GOVERNMENT CUSTOMERS. A significant portion of our revenue is derived
from sales to the U.S. government, either directly by us or through system
integrators and other resellers. Sales to the government present risks in
addition to those involved in sales to commercial customers, including potential
disruptions due to appropriation and spending patterns and the government's
reservation of the right to cancel contracts for its convenience. A portion of
our business requires security clearances from the United States government. We
have implemented measures to maintain our clearances in light of the fact that
our CEO, Mr. Robert Bishop, is not a United States citizen. However, these
arrangements are subject to customer review and approval and periodic review by
the Defense Security Service of the Department of Defense. Any disruption or
limitation in our ability to do business with the United States government could
have an adverse impact on SGI.
EXPORT REGULATION. Our sales to foreign customers are subject to export
regulations. Sales of many of our high-end products require clearance and export
licenses from the U.S. Department of Commerce under these regulations. The
Departments of Commerce and Justice are currently conducting civil and criminal
investigations into SGI's compliance with the export regulations in connection
with several export sales to Tier 3 countries. We believe that these matters
will be resolved without a significant adverse effect on our business. However,
there is no assurance that these matters will not have an unforeseen outcome
that could impair the conduct of our business with the U.S. government or our
sales outside the United States.
Our international sales would also be adversely affected if such regulations
were tightened, or if they are not modified over time to reflect the increasing
performance of our products.
INTELLECTUAL PROPERTY. We routinely receive communications from third parties
asserting patent or other rights covering our products and technologies. Based
upon our evaluation, we may take no action or may seek to obtain a license. In
any given case there is a risk that a license will not be available on terms
that we consider reasonable, or that litigation will ensue. We expect that, as
the number of hardware and software patents issued continues to increase, and as
competition in the markets we address intensifies, the volume of these
intellectual property claims will also increase.
MARKET RISK. In the normal course of business, our financial position is
routinely subjected to a variety of risks, including market risk associated with
interest rate movements and currency rate movements on non-U.S. dollar
denominated assets and liabilities, as well as collectibility of accounts
receivable. We regularly assess these risks and have established policies and
business practices to protect against the adverse effects of these and other
potential exposures. As a result, we do not anticipate material losses in these
areas.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required under this Item 3 is included in the section above
entitled Market Risk.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are defending putative securities class action lawsuits filed in the U.S.
District Court for the Northern District of California and in California
Superior Court for the County of Santa Clara in December 1997 and January 1998
alleging that SGI and certain of its officers made material misrepresentations
and omissions during the period from July to October 1997. The U.S. District
Court is considering plaintiffs' motion for a voluntary dismissal of the case
without prejudice and defendants' motion for partial summary judgment. Discovery
is proceeding in the California Superior Court case.
We are also defending a securities class action lawsuit involving Alias Research
Inc., which we acquired in June 1995. The Alias case, which was filed in 1991 in
the U.S. District Court for the District of Connecticut, alleges that Alias and
a former officer and director made material misrepresentations and omissions
during the period from May 1991 to April 1992. The case has been remanded to the
U.S. District Court and is proceeding through discovery.
The U.S. Departments of Commerce and Justice are currently conducting civil and
criminal investigations into SGI's compliance with export regulations in
connection with several export sales to Tier 3 countries. See "Risks That Affect
Our Business - Export Regulation."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) SGI held its Annual Meeting of Stockholders on October 25, 2000. The
meeting was adjourned and reconvened on November 1, 2000 to allow
additional time for shareholders to vote on Proposal 2, an amendment to
SGI's Certificate of Incorporation to eliminate the classified Board
structure. Proxies for the meeting were solicited pursuant to
Regulation 14A.
(b) SGI's Board of Directors is divided into three classes, with directors
in each class serving for three-year terms. As noted below, the
proposal to eliminate this classified Board structure was not approved
by a majority of the outstanding shares, which was the required
shareholder vote. Accordingly, not all Directors are elected at each
Annual Meeting of Stockholders. Robert A. Lutz and James A. McDivitt
were re-elected as Directors at the meeting. The Directors whose terms
of office continued after the meeting are Robert R. Bishop and C.
Richard Kramlich. Dr. Lucy Shapiro resigned from the Board in July 2000
and Robert Shapiro resigned effective October 25, 2000. The Board
adopted an amendment to the bylaws to reduce the number of directors to
four effective October 25, 2000.
(c) The matters described below were voted on at the Annual Meeting of
Stockholders, and the number of votes cast with respect to each matter
and, with respect to the election of a director, were as indicated.
<TABLE>
<S> <C>
1. To elect two Class II Directors of SGI to serve for a three-year
term.
CLASS II DIRECTORS:
ROBERT A. LUTZ:
For: 156,003,249 Withheld: 3,403,022
JAMES A. MCDIVITT:
For: 157,811,326 Withheld: 1,594,945
2. To approve an amendment to SGI's Restated Certificate of
Incorporation to eliminate classification of the Board of
Directors.
For: 78,606,116 Against: 1,083,771 Abstain: 283,876 Non-vote: 79,974,887
</TABLE>
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<PAGE>
3. To ratify the appointment of Ernst & Young LLP, as independent
auditors of SGI for the fiscal year ending June 30, 2001.
For: 158,804,637 Against: 388,382 Abstain: 213,352
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.28 Letter of Agreement entered into by the Company with Harold
Covert dated July 20, 2000.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 13, 2000 SILICON GRAPHICS, INC.
a Delaware corporation
By: Harold L. Covert
--------------------------------------
Harold L. Covert
Executive Vice President, Chief
Financial Officer and Chief
Administrative Officer (Principal
Financial Officer)
Jeffrey Zellmer
---------------------------------------
Jeffrey Zellmer
Vice President, Corporate Controller
(Principal Accounting Officer)
-20-
<PAGE>
SILICON GRAPHICS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
10.28 Letter of Agreement entered into by the Company with Harold Covert
dated July 20, 2000.
27.1 Financial Data Schedule
</TABLE>
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