SGI Reports Second Quarter Financial Results

MOUNTAIN VIEW, Calif. (January 31, 2006)—Silicon Graphics (OTC: SGID) today announced results for its second fiscal quarter which ended December 30, 2005.

Revenue for the second quarter fiscal year 2006 was $144 million, gross margin was 41.7% and the operating loss was $28 million. For comparison, in the first quarter FY06, revenue was $170 million, gross margin was 37.8% and the operating loss was $26 million. The second quarter fiscal year 2006 net loss was $30 million or $0.11 per share, compared with a net loss of $32 million or $0.12 per share in the previous quarter.

GAAP operating expenses for the second fiscal quarter were $88 million compared with $90 million in the first fiscal quarter 2006. Non-GAAP operating expenses were $78 million in the second quarter compared with $83 million in the first fiscal quarter excluding restructuring charges of $10 million and $7 million, respectively.

"Our Q2 performance was consistent with our operating income guidance and within our EBITDA targets with strong margins offsetting lower than expected billings," said Jeff Zellmer, chief financial officer. "Looking forward, we will take a number of actions to improve our top-line results and continue to lower our cost structure."

Unrestricted cash, cash equivalents and marketable investments on December 30, 2005 were $66 million as compared with $77 million at September 30, 2005.

Separately, SGI today announced that Dennis McKenna has been named as chairman, CEO and president, replacing Robert Bishop, who will remain as vice chairman.

SGI will host a conference call today at 2 p.m. PT to provide additional details. A live webcast is available at http://www.sgi.com/company_info/investors/. The dial-in number is 877-704-5381 or 913-312-1295. An audio replay of this call will be available after 5 p.m. PT today at 888-203-1112 or 719-457-0820 (passcode: 9146935). All links to the archived Webcast and audio replay are available through SGI's Web site at http://www.sgi.com/company_info/investors/. This release contains non-GAAP financial measures. Management believes that a non-GAAP presentation of operating expenses is useful to investors to facilitate period to period comparisons of SGI's operating results. The Investor Relations section on our web site at www.sgi.com/company_info/investors provides comparable GAAP financial measures and the related reconciliation.

Forward-Looking Statements
This news release contains forward-looking statements relating to future events or expected financial performance that involve risks and uncertainties. The company's future results could differ materially from the expectations discussed herein. Factors that might cause such a difference include risks associated with the timely development, production and acceptance of new products and services; increased competition; dependence on third party partners and suppliers; the failure to achieve expected product mix and revenue levels; failure to manage costs and generate improved operating results and cash flows; failure to maintain compliance with debt covenants; and failure to maintain adequate cash resources for the operation of the business. These and other risks are detailed from time to time in SGI's periodic reports that are filed with the Securities and Exchange Commission, including SGI's quarterly report on Form 10-Q for the quarter ended September 30, 2005. Silicon Graphics is under no obligation to publicly update or revise any forward-looking statements, whether changes occur as a result of new information, future events or otherwise.

SILICON GRAPHICS | The Source of Innovation and Discovery™
SGI, also known as Silicon Graphics, Inc. (OTC: SGID), is a leader in high-performance computing, visualization and storage. SGI's vision is to provide technology that enables the most significant scientific and creative breakthroughs of the 21st century. Whether it's sharing images to aid in brain surgery, finding oil more efficiently, studying global climate, providing technologies for homeland security and defense or enabling the transition from analog to digital broadcasting, SGI is dedicated to addressing the next class of challenges for scientific, engineering and creative users. With offices worldwide, the company is headquartered in Mountain View, Calif., and can be found on the Web at www.sgi.com.

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