Looking for the technology company that reported calendar Q3 2011 revenue that was 58% higher than its Q3 of 2010? That would be Silicon Graphics International (SGI), manufacturer of high-performance technical computers (supercomputers) and high-efficiency server systems for datacenters and cloud computing.
GAAP revenues for fiscal Q1 2012 ending September 30, 2011 were $178.9 million, down 8% sequentially from $195.5 million, but up 58% from $112.9 million in the year-earlier quarter. GAAP net income was negative $2.7 million, improved sequentially from negative $12.1 million and improved from negative $11.2 million year-earlier. EPS (earnings per share) were negative $0.08, improved sequentially from negative $0.39, and also improved from negative $0.37 year-earlier.
While in the red on a GAAP basis, on a non-GAAP basis (mostly eliminating non-cash expenses like stock-based compensation) SGI managed a profit of $2.2 million, or $0.07 per share. SGI has gone through a period of investing to introduce new products, and also expanding its sales force. Profit margins could improve as further ramps in revenue should not require similar ramps in operating expenses.
While not giving guidance by quarter, for fiscal year 2012 (running to June 2012) revenue is expected between $740 and $780 million, up to 24% over fiscal 2011.GAAP EPS is estimated between $0.15 and $0.30. Non-GAAP EPS expected between $0.60 and $0.80.
How are they achieving such stellar growth while other computer makers are lagging? SGI specializes in expensive computers used for scientific research, as well as large systems for cloud computing and Web farms. These are all areas that continue to grow quickly. While there is competition from the likes of IBM, HP, Dell, and Cray, the newest systems introduced by SGI, notably Altix UV, are better at addressing the needs of their markets.
Nor is SGI resting on their laurels. They are introducing computers that run large scale systems running Windows SQL Server. They have improved their compatibility with Hadoop and Red Hat Enterprise Linux. They continue to be a major supplier for Amazon's cloud system. They also have started acquiring small companies that specialize in supercomputer application software. SGI expects that the ability to sell software as well as hardware will be a major advantage for verticals they service, with higher profit margins.
Finally, they ended the latest quarter with $115 million in cash with no debt. They did use $30 million of cash to build inventory in the quarter, but the systems built had been pre-ordered and should be shipping this quarter.
Because of the size of the systems involved, some quarter-to-quarter lumpiness is to be expected.
If you read what scientists are saying about Altix UV, you will realize why management has become very confident in SGI's future. On the analyst call they stated the next big SGI milestone will be $1 billion in annual revenue, which should bring between $1.75 and $2.00 non-GAAP EPS per share.
The recent growth has been in the face of a lot of uncertainty and a poor macroeconomy. Even so, if the doomsayers are right about global slowdown or meltdown scenarios in 2012, that could impact sales. I am more concerned about competition, but it does seem that for now SGI has found a niche where it can outcompete far larger companies.
For more details on calendar Q3 results, see my SGI Q1 fiscal 2012 analyst call summary.
Disclaimer: I am long SGI. I won't change my position for at least one week from today.
The usual risks apply, so keep diversified!
See also: www.sgi.com
Showing posts with label SQL Server. Show all posts
Showing posts with label SQL Server. Show all posts
Tuesday, November 29, 2011
Monday, August 22, 2011
SGI Sees Revenue Growth in 2012
Silicon Graphics International (SGI) sells data processing systems with a focus on technical computing. Their high-end systems are used to solve some of the toughest computational problems encountered by government and industry. They also provide datacenter equipment for cloud computing to companies like Amazon.
The new SGI is basically a combination of the old Rackable Systems, which specialized in datacenter server systems, and the old, bankrupt SGI, which specialized in high-performance science computing. I had my doubts when the two companies merged, but the new company turned out to be better at executing than either of the old companies.
The transformation of SGI is about technology, sales, and profit margins. In last Thursday's report on fiscal Q4 2011 (ending June 24) we saw record revenues for the typically slow Q4. Revenues were $195.5 million, up 36% sequentially from $143.7 million and up 92% from $101.6 million year-earlier. While GAAP net income was negative $12.1 million, non-GAAP net income was $3.9 million. Of course I would prefer to see GAAP net income in the black too. In this case the difference is largely due to non-cash operating expenses, restructuring, and software revenue recognition rules (because the computer systems have software bundled with the hardware). As a check on the merits of GAAP vs. non-GAAP, the cash balance was up $9.4 million in the quarter.
SGI is debt-free and had a cash and equivalents balance of $143 million at quarter's end. They can fund a strong R&D effort and could make acquisitions if needed.
The new Altix UV supercomputer line has no real direct competitors. It has a memory and processor model that make it very attractive to high-end technical users. Because of that profit margins are good. The rackable systems for server farms and cloud computing continue to offer innovative designs, but margins have been improved there as well.
The company is now truly international, which is important when your key products are supercomputers. Service revenue is also a key factor in the new, profitable business model.
In response to questions from analysts management went into some detail, and speculation, about technologies they are developing. They are working with Microsoft to expand the capabilities of SQL Server. They believe that for certain types of computing they will be able to deliver performance equivalent to Oracle's Exadata systems at about one-third of Oracle's current price. Considering how successful Exadata has been, both in terms of compute ability and revenue generation, that could be highly significant in 2012.
Analysts also speculated that with budgets thin, SGI might have difficulty selling its computers to government agencies. However, SGI has little or no exposure to state and local governments in the U.S. Federal agencies still seem eager to decrease their other costs by upgrading their compute capabilities. For industry, the total cost of the design process is decreased by buying more computational power.
While not giving guidance by quarter, for fiscal year 2012 (running to June 2012) revenue is expected between $740 and $780 million, up to 24% over fiscal 2011.GAAP EPS is estimated between $0.15 and $0.30. Non-GAAP EPS expected between $0.60 and $0.80.
For more details on quarter results, see my SGI Q4 fiscal 2011 analyst call summary.
Disclaimer: I am long SGI.
The usual risks apply, so keep diversified.
See also: http://www.sgi.com/
The new SGI is basically a combination of the old Rackable Systems, which specialized in datacenter server systems, and the old, bankrupt SGI, which specialized in high-performance science computing. I had my doubts when the two companies merged, but the new company turned out to be better at executing than either of the old companies.
The transformation of SGI is about technology, sales, and profit margins. In last Thursday's report on fiscal Q4 2011 (ending June 24) we saw record revenues for the typically slow Q4. Revenues were $195.5 million, up 36% sequentially from $143.7 million and up 92% from $101.6 million year-earlier. While GAAP net income was negative $12.1 million, non-GAAP net income was $3.9 million. Of course I would prefer to see GAAP net income in the black too. In this case the difference is largely due to non-cash operating expenses, restructuring, and software revenue recognition rules (because the computer systems have software bundled with the hardware). As a check on the merits of GAAP vs. non-GAAP, the cash balance was up $9.4 million in the quarter.
SGI is debt-free and had a cash and equivalents balance of $143 million at quarter's end. They can fund a strong R&D effort and could make acquisitions if needed.
The new Altix UV supercomputer line has no real direct competitors. It has a memory and processor model that make it very attractive to high-end technical users. Because of that profit margins are good. The rackable systems for server farms and cloud computing continue to offer innovative designs, but margins have been improved there as well.
The company is now truly international, which is important when your key products are supercomputers. Service revenue is also a key factor in the new, profitable business model.
In response to questions from analysts management went into some detail, and speculation, about technologies they are developing. They are working with Microsoft to expand the capabilities of SQL Server. They believe that for certain types of computing they will be able to deliver performance equivalent to Oracle's Exadata systems at about one-third of Oracle's current price. Considering how successful Exadata has been, both in terms of compute ability and revenue generation, that could be highly significant in 2012.
Analysts also speculated that with budgets thin, SGI might have difficulty selling its computers to government agencies. However, SGI has little or no exposure to state and local governments in the U.S. Federal agencies still seem eager to decrease their other costs by upgrading their compute capabilities. For industry, the total cost of the design process is decreased by buying more computational power.
While not giving guidance by quarter, for fiscal year 2012 (running to June 2012) revenue is expected between $740 and $780 million, up to 24% over fiscal 2011.GAAP EPS is estimated between $0.15 and $0.30. Non-GAAP EPS expected between $0.60 and $0.80.
For more details on quarter results, see my SGI Q4 fiscal 2011 analyst call summary.
Disclaimer: I am long SGI.
The usual risks apply, so keep diversified.
See also: http://www.sgi.com/
Subscribe to:
Posts (Atom)
