Silicon Graphics is to spin off another unit as it struggles to regain financial health.
Just a week after it said it would hive off its Mips chip operations, it decided to divest itself of Cosmo Software, a Web content tools maker it created around last year's acquisition of 3D specialist Paragraph International.
The news came as the company announced a 22 per cent drop in Q3 revenue and its third quarter running in the red, admitting further cuts were on the cards.
Most of the shares in Cosmo will be sold to a small group of three investors, with the spin-off planned for next month. SGI claims it is hard to put a value on a software unit within a hardware company and that Cosmo will reap its full potential if it has freedom of action.
Analysts believe, though, that the move, combined with the Mips decision, is part of a process of refocusing on core, profitable businesses.
This inevitably raises a question mark over SGI's Cray Research supercomputer arm. Officially part of Mips, sources say it will be kept within the parent group as its high end servers complement SGI's own core user bases in scientific and number crunching applications. But in a niche market where the costs of manufacturing, development and sale are massive, some speculate SGI will soon look to sell off Cray too.
Sliding revenues from supercomputers, both under the Cray and SGI badges, were one factor in the third quarter problems although the core Unix workstation lines also saw decline.
In the quarter, revenues fell 22 per cent to $708 million with a net loss of $153 million, compared to profits of $11 million a year earlier. Without restructuring charges, the loss would have been $68 million.
Despite the bad news, SGI shares closed up 19 cents as analysts responded well to its aggressive refocusing plans, which include axing 1,000 jobs.
Cosmo's workforce of 200 is expected to remain with the new company. Cosmo was created last year when SGI merged its Paragraph acquisition with its existing Internet software unit to focus on Web content tools and graphics technologies.
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