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Inside Track: SGI shareholder wants company to seek buyer

An HPC industry insider pointed the Inside Track to an interesting bit of news last night about SGI.

As the San Jose Mercury News reported yesterday (here), shareholder Southpaw Asset Management wants SGI’s board to find a buyer. Southpaw holds approximately 5.3% of SGI’s common stock, and disclosed their letter to SGI’s board in a filing with the SEC (which you can read here).

What’s got Southpaw’s knickers in a knot? SGI stock’s plummet, from a high of 30 this year to a low of 14.75 just a few days ago. From the letter

…the significant decline in the stock price over the course of the past ten months, coupled with the Board’s “business as usual” strategic direction, compels us to become more active. …For the Board and management to continue to take comfort in a turnaround story that is not being reflected in the stock price is unacceptable.

What does Southpaw want? A sale to another HPC company

The benefits to SGI’s competitors are substantial and encompass the expansion possibilities from the Company’s installed base and best in class technology, in addition to the synergies that could be realized. Anyone of the Company’s competitors could significantly increase revenues from SGI’s products and services through their substantially larger sales platforms, installed bases and superior resources. Furthermore, much of the Company’s SG&A could be cut by a strategic buyer to create substantial returns without any organic growth. With more than $150 million of annual SG&A, the
cost cutting opportunities are substantial for a strategic buyer and make SGI an excellent acquisition candidate on that basis alone.

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