SGI is done and sold (heard this rumor yesterday)

[updated] see bottom: SGI will be acquired by Rackable. This said, read the press release. Specifically the portion that indicates that

Yes, this is right (and assuming it is not an April Fools joke), this means SGI file for bankruptcy this morning. They had a looming $5M payment due last Friday to Morgan Stanley. I was searching for information as to whether or not they had made that payment, as I thought that MS might force them into a chapter 7, and sell off their assets. Well, it looks like they hit chapter 11 (second time), and did an asset sale. So, if this is all real, then SGI is done. It is now part of Rackable. They had ~1500 people going into this. I’ll be surprised if they have more than a hundred or two make the move.

Continuing

This was done as a very fast sale. I knew they were in trouble, and it looks to me like this was negotiated quickly (it doesn’t look pre-packaged) so as to avoid the chapter 7 filing. Still Morgan Stanley and other creditors could object, and if so, throw a monkey wrench into this. In which case, chapter 7 is far more likely. My sympathies go out to all my former colleagues still employed (as of yesterday) at SGI. Hopefully business schools will pick up the sad tale of this company’s decline as in a section on “how not to run a company, and lose great momentum”. [update 1]: Wow … I called this some time ago. Spot on analysis. Read the form 8k for the filing.

Ok, we knew that part … this is where it gets interesting

This is almost exactly what I said could happen here.

I am betting that on Friday the 27th of March, in the afternoon, 16 days after I wrote the previous bit, Morgan Stanley called SGI and said “its time to pay”. SGI said “hang on a moment”, and Morgan Stanley said “no.” I bet that MS gave them until COB on the 3rd to get their affairs in order and signaled an intent to declare them in default. This is speculation. It is also now history. This is what else is in the 8k, and why I speculated like this …

This is effectively SGI reminding its creditor that any remedies (asset seizure, sale, chapter 7 forcing) is automatically stayed during bankruptcy proceedings. But … the creditors can object to the sale, and demand a better price. It would not surprise me if they do something like this, as it looks like SGI owes them about $142M and change.

They had to pay MS $20.7M on Friday. They couldn’t make the payment. MS told them they were in default, and gave them a very short window to correct the default. And SGI went this route. This story is not over. Its not Rackable walking away with the assets on the cheap. This one could get quite interesting. And not in a good way. Hmmm… I wonder who owns my patent now. Maybe I should have the company file to purchase that. [update 2] John (both of them) are covering this at InsideHPC. Two articles. First was the announcement, and my sympathies to John L as this is/was his employer. It sucks when they implode on you. Second was a similar analysis to what I did in the past with SGI acquiring the LNXI assets. I wrote previously

… which is almost exactly what happened to SGI today. Their assets were purchased by Rackable (tentatively), but this was done to escape debt service obligations via a fast chapter 11. More to the point, I had pointed out in this article that

This was discussing the problem in terms of the T&C; imposed by the government. They are quite onerous. As are some, quite frankly, from universities. We have walked away from business with ridiculous T&C;’s. We won’t chase bad business. SGI did. As did LNXI. Well SGI had other issues I won’t get into, but thats for a different post. With this in mind, a commenter at InsideHPC.com pointed out:

Heh. Spot on. All Government HPC purchases should be on the open market (not under GSA contract) and done by industry standard T&C.; That is, unless you want exactly one vendor doing HPC, for whom HPC is but rounding error in their business, and a fast business decision can effectively turn off HPC at that organization. Which is where we are (rapidly) headed.