HPCwire: Mind the GAAP

Since 1986 - Covering the Fastest Computers in the World and the People Who Run Them

HPCwire >> Features

February 09, 2009

Mind the GAAP

by John West, for HPCwire

Page: 1 of 3
1 | 2 | 3 All »

SGI announced earnings for its second fiscal quarter (FY2009) last Thursday, reporting lower revenue and higher losses when compared with Q1, and citing the tough economic climate as a primary cause. As has been the case with many of its recent earnings announcements, the company reported both figures created according to Generally Accepted Accounting Principles (or GAAP results), and non-GAAP results. HPCwire had a chance to talk with SGI Chief Financial Officer Greg Wood after the earnings call, and he walked us through the company's financial results and explained to us why non-GAAP measures are important, and meaningful indications of the company's performance.

SGI's financial results from the second fiscal quarter (ended Dec. 26, 2008) didn't have the company popping champagne corks at its Sunnyvale, Calif., headquarters.

Revenue for the second quarter was $82.8 million, compared to $92.8 million in the previous quarter and $90.1 million in the second quarter of the prior year. The company’s net loss for the quarter was $49.2 million, or $4.24 per share, versus a net loss of $33.7 million or $2.91 per share last quarter and $42.2 million or $3.78 per share in the second quarter of the prior year.

During the earnings call, company CEO Bo Ewald talked about the challenging financial climate during the quarter and its effect on some of its core markets. SGI's media customers were feeling pressure from dropping revenues as their clients pulled back on air time for splashy advertising campaigns, and business from the federal customers slowed from what SGI reckons as the impact of a continuing resolution and the uncertainty surrounding the new administration.

Despite the dismal business climate, the company did report an increase of $10 million in bookings during the quarter, rising from $58 million in Q1 to $68 million. Ewald characterized these bookings as fairly broad-based: there were no large deals in that figure, with largest orders being at most in the $6-7 million range. 18 of the top 20 orders were with from the government or from government-funded customers, with the last two being million dollar orders for storage from the media sector and (interestingly) SGI's new visualization offering in the aerospace sector.

Ewald did mention that the company is working on a large deal that didn't close in time for Q2, but which it expects to be announcing soon. CFO Greg Wood ascribed SGI's decrease in margin during this quarter (down to 26 percent from 32 percent in Q1) to a draw down of the company's cash reserves in order to service this deal, and to adverse foreign exchange rate impacts. As the company moves forward, Ewald described the company's strategy to grow the business around its Industrial Strength Linux Environment (ISLE), the visualization offering, and its new Ultraviolet compute platform.

Digging into the results a little further, operating expenses for Q2 were down from Q1, reflecting savings from a Q1 headcount reduction. SGI started this fiscal year with 1,632 employees, and during Q1 eliminated 75 positions. Additional headcount reductions of 270 or so following an additional restructuring in December have brought SGI staff down to 1,287 today. The Q2 results include the charge for that action (termination of leases, employee severance packages, and so on) but not the benefits, which Wood estimated on the earnings call will be about $30 million annually.

Wood and Ewald also discussed an agreement SGI reached with creditors in December to delay repayment of outstanding debts, which had been due to enter repayment at the end of last year. While they noted that this was a positive outcome for the business in the short term, both Wood and Ewald touched on their goal to achieve a comprehensive restructuring of the company’s debt moving forward.

As has been the case with all recent earnings announcements, SGI also highlighted non-GAAP results during the call.

Pro forma revenue, a non-GAAP measure, for the second quarter was $89.3 million, compared to $117.5 million in the previous quarter and $109.1 million in the second quarter of the prior year. Pro forma revenue excludes the effect of Statement of Accounting Position 97-2, which requires the deferral of revenue in certain circumstances under software revenue recognition rules and is useful when considered in connection with revenue as calculated under GAAP.

Page: 1 of 3
1 | 2 | 3 All »

Article Tools

Share Options

(Digg, Technorati, more)

Subscribe

Subscribe to HPCwire

Discussion

There are 0 discussion items posted.

RSS Feeds

Feeds by Topic

Feeds by Industry

Feeds by Content Type

Around the Web

Picking the Right Processor

Sep 03 | Should engineers take advantage of GPU computing? Read more...

HP, Hynix Start Memristor on Path to Commercialization

Sep 02 | Could see first products in three years. Read more...

TED Talks for the IT Crowd

Sep 01 | A hand-picked selection of video presentations from the TED conference -- because the next big thing has to start somewhere. Read more...

LHC Compute Grid Teaches Some Valuble Lessons

Aug 30 | CERN project adapts its computation and storage strategy as hardware gets cheaper and better. Read more...

Godson CPUs Groomed for Supercomputing Duty

Aug 26 | Chinese-made chip adds vector SIMD unit; delivers 128 gigaflops in 40 watts. Read more...

Read more headlines...

Featured Whitepapers

Effective Backup and Restore

Jul 29 | | Panasas storage solutions deliver high throughput with many concurrent backup IO streams to standard backup applications such as Veritas NetBackup™ or EMC® NetWorker™. Download this whitepaper to understand the essential elements for effective backup and restore: the tape subsystem, networking, file system workload and administrative policy.

GPU Cluster Realities Whitepaper from Platform Computing

Jul 28 | | As compelling economics and performance drive GPUs into HPC clusters, developers are scrambling to catch up. Download this whitepaper from Platform Computing to understand how to capture the benefits of exciting new GPU capabilities.

View the White Paper Library

Multimedia

Webcast: Are you drowning in data?

In this webinar you will hear about the current storage challenges facing the HPC community, how Panasas storage solutions provide exceptional performance, scalability, and manageability, and how you can achieve the lowest total Cost of Ownership with a system that installs and configures in 15 minutes.

Webcast: Virtualized Data Center Roundtable

Join this online panel discussion for live Q&A with leading industry experts, analysts, and end-users to discuss the latest innovations, best practices, barriers to implementation, and measurable benefits of server virtualization with a particular focus on today's real world solutions.

Webcast: Watch SC09 Birds of a Feather Video: Scalable Fault-Tolerant HPC Supercomputers

Learn about scalable fault-tolerant architectures and examples of energy efficient and scalable supercomputing clusters using dual QDR InfiniBand to combine capacity computing with network failover capabilities with the help of programming languages such as MPI and a robust Linux cluster management package.