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Poring over the books

Joe Landman has a pair of posts on financials at SGI and ClearSpeed. I’m frankly jealous of his financial acumen — perhaps its time to crack open my “Essentials of Corporate Finance.”

From the SGI piece, which has a very accessible analysis

You can see them here. $93,8M revenue, $29.5M gross profit. COGS of $64.4M. OPEX of $58.1M. Operating profit (loss) is $29.5M – $58.1M or -$28.6M (or for the accounting types with us ($28.6M) ). When they are done with the rest of accounting, their net income is ($35.1M) or -$35.1M.

This is a net loss, but it is lower than previous net losses by $4.6M. Their revenue increased $14.8M or so.

…What they have to do to be successful is to make some hard decisions about what they are, their product mix going forward, be honest with themselves about prospects of success in particular sub-markets, and find the lowest cost providers of various technologies that enhance their competitive positions and allow them to differentiate upon that.

True words. Joe also comments in the SGI piece on the recent and mysterious upward trend in SGI’s stock — they’ve moved from 4.98 on 9/15 to 11.94 on 9/26 — and speculates about a wider trend for HPC to receive mobilized cash:

Notice that their stock has gone from $5 to about $12 in recent days. Why this is, is a mystery to me. Ok, put another way, I am asking “why SGI” as there doesn’t appear to be anything specifically fundamentally better about the numbers. So if you look at others in the market in HPC: NVDA shows a similar bounce, as does MSFT, as does CRAY, …

That is, it looks like investors were looking for places to park their money … fast … over the last two weeks. Huge sums were pulled out of the financial stocks….HPC shows good solid growth, and it it [sic] probably one of a few areas where capital flowed in.

I was intrigued by Joe’s hypothesis about money moving into HPC, so I fired up the Yahoo charts and looked for myself at the past 5 days, with special emphasis on the end of the week. I’m always looking for proof that HPC is growing up.

Over the past few days MSFT is up, Cray is up, HP started to pull back, Intel and IBM are up. Mellanox is down, Cisco and Foundry are up, Sun’s down, Isilon is down and EMC is up-ish, AMD is down-ish, Rackable is down, and so is QLogic. In short, it looks all over the map to me. I would have thought a flight to HPC would have looked a little more indiscriminate, simply because there is too little analyst coverage of this sector-ette for big cash to be so picky about which companies they park in in HPC. Thoughts?

On ClearSpeed, just straightforward, bad news.

My follow-on comment addressed the interim results. You can see their share price versus time here on Yahoo. The decline looks like a straight line on a logarithmic graph. A long tail. Not quite the same as what the VCs like.

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