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Silicon Graphics filed for Chapter 11 bankruptcy protection, won a $250 million debt reduction, and set out on a six-month-long bid to re-organise its way back into the black.

The high-performance computing vendor released low-performance results for the third quarter, losing $43 million, compared with a $45 million loss for the same quarter last year. Revenue for the quarter was $108 million, compared with $144 million in the previous quarter, and $159 million for the third quarter of last year.

SGI plans to emerge from bankruptcy in six months, and has excluded its subsidiaries outside the US, so they are not subject to the requirements of Chapter 11.

Supercomputers get personal thanks to SGI

"We want to assure our customers, our employees and our communities that SGI is operating, business as usual," SGI chief executive Dennis McKenna said. "Our customers can continue to rely on SGI for its mission-critical products, services and support."

McKenna became chief executive, president and chairman of the board of SGI in late January, when he succeeded Robert Bishop, who remains on the board of directors. McKenna was formerly the chief executive of privately-held SCP Global Technologies.

Since beginning its reorganisation earlier this year, SGI has completed a program to save $50 million in the short term and another $100 million annually over the long term. The company also said it has improved the efficiency of its manufacturing operations and expanded its product road map.

"Obviously, I'm going to have concerns over future support," said SGI system user Brian Ropers-Huilman, director of high performance computing at Louisiana State University in Baton Rouge. The university bought a Prism Extreme visualisation system with 32 processors from SGI about a year ago, and this system has specialised support needs that only SGI can meet, he said.

"I don't feel that they are going to flat-out abandon their customers at this point," said Ropers-Huilman. "I have to believe that they are going to have a strategy."

SGI has many academic and research users, and the company's technology is also used at many compute-intensive companies such as Ford, which last year bought SGI storage and computer systems for three of its research centres, according to SGI.

Charles King, an analyst at Pund-IT, said many of SGI's high-performance customers may have the skills in-house to maintain the systems themselves. He also believes that there are enough SGI customers to encourage third-party support. The SGI Worldwide User Group is scheduled to meet in Las Vegas beginning 5 June.

SGI’s largest customers may be government-related. For instance, the National Aeronautics and Space Administration is using an SGI Altix supercluster supercomputer called Columbia - named to honor the space shuttle astronauts - made up of 10,240 Itanium 2 processors.

The bankruptcy filing is a key part of the strategy to make SGI healthy again, McKenna said.

"This is a necessary and responsible step that will strengthen the company and foster a sustained turnaround at SGI," he said. "We expect to proceed quickly and will emerge from these proceedings with a significantly improved balance sheet and, as a result, greater operating flexibility. I am confident in SGI's future. The new direction I have set is comprehensive, the product portfolio we will unveil is expansive, and our dedication to customer satisfaction is unwavering."

The bankruptcy filings were made Monday in the US Bankruptcy Court for the Southern District of New York.

"We regret the effect that this will have on SGI's shareholders and other unsecured creditors," McKenna said. "SGI plays a critical role in the world's infrastructure. This needs to be preserved."

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