ACADEMIA

Silicon Graphics announced preliminary financial results for its third fiscal quarter ended March 31, 2006. Based on preliminary data available at this time, the Company expects revenue of approximately $108 million for the third fiscal quarter as compared to its guidance of $140 million to $160 million. The Company's cost reduction initiatives continue to be on track, although there continue to be significant restructuring and professional advisory fees associated with the turnaround efforts. For comparison, revenue for the second quarter fiscal year 2006 was $144 million. In the first quarter FY06, revenue was $170 million. Unrestricted cash, cash equivalents and marketable investments on March 31, 2006, were relatively flat at approximately $65 million. The Company attributes the revenue shortfall to delays in gaining final acceptance on certain customer installations and reduced revenue from its stand-alone visualization products due to the March announcement that the Company was ceasing further development activities for these products. In addition, executive management changes and heightened media coverage on the Company's future contributed to delays in customer funding. "The revenue results are clearly unacceptable," said Dennis McKenna, chairman and CEO of SGI. "Since I joined the Company less than 90 days ago, we have redefined our strategies and approaches across markets, geographies, and products. The intent of these efforts is to reposition the Company to address 80% of our customers' spend versus the 20% we address today. We know where we want to go. We are redefining our business metrics and performance criteria and the associated accountability. We should begin to see the benefits of these efforts in our Q1FY07 quarterly results."