Press Release

SGI Reports Fiscal 2007 Third Quarter Results

Results Reflect Continued Progress

SUNNYVALE, Calif. (May 8, 2007) — SGI (NASDAQ: SGIC) today announced financial results for the third quarter of its fiscal 2007, ended March 30, 2007. On a GAAP basis, revenue for the quarter was $111 million and operating loss was $20 million. GAAP gross margin was 33.0% and operating expenses were $57 million. As previously noted and more fully described below, GAAP financial results for the quarter are significantly impacted by non-cash adjustments dictated by the fresh start accounting treatment required as a result of the company's emergence from Chapter 11 bankruptcy protection in October 2006, as well as other accounting changes. In this press release, the company uses certain pro forma financial measures that are not calculated in accordance with GAAP, or non-GAAP financial measures. Management believes that these non-GAAP financial measures are useful to investors because they facilitate period to period comparisons of SGI's performance and because they help investors view the company's results of operations through the eyes of management and the company's lenders. SGI's credit line covenants and management reporting and incentive plans are measured against certain of these non-GAAP financial measures.

Pro forma revenue was $130 million in the third quarter of fiscal 2007, compared with $134 million in the second quarter of fiscal 2007. Pro forma revenue excludes the impact of fresh start accounting and the deferral of the company's recognition of revenues for certain of the company's transactions where software is more than incidental to the overall solution. Pro forma gross margin for the third quarter adjusted for similar items was 43.6% compared with 38.1% in the prior quarter. Excluding restructuring, bankruptcy-related expenses, stock-based compensation expense and amortization of intangibles, pro forma operating expenses were $53 million in both the third quarter and the prior quarter. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the third quarter, as defined in the company's debt agreements, was $10 million, compared with $4 million for the second quarter of fiscal 2007.

As of March 30, 2007, SGI had backlog of $109 million, compared with backlog of $139 million at December 29, 2006. Backlog is comprised of product and professional services expected to be delivered within the next nine months, which have not yet been reflected in revenue. Backlog does not include customer support maintenance contracts.

SGI ended the third quarter with $70 million in total unrestricted cash, compared with $75 million at the end of the second quarter of fiscal 2007. The company utilized approximately $6 million of cash during the quarter for the settlement of bankruptcy-related obligations. Availability under the company's revolving line of credit was $30 million as of March 30, 2007 and no borrowings were made under the line during the quarter.

"Our third quarter results demonstrate continued progress," said Robert (Bo) H. Ewald, SGI's Chief Executive Officer, who joined the company on April 9. "We're pleased with the financial results and the strong support from our customers and employees. We will be focusing more on increasing order volume and improving our traction in the market. Our execution on product and market plans to drive sustainable long-term revenue growth for the company is as critical as near-term performance."

"While we are reaching stability, our business is still in the transition phase," said Kathy Lanterman, SGI's Chief Financial Officer. "Over the next year we will be focused on building an operating model for the company that will lead us to revenue growth and that will continue to be cash flow positive."

As a policy, the company does not provide specific forward-looking guidance.

A reconciliation of the non-GAAP financial measures used in this press release to the company's GAAP results of operations, including an illustration of the impact of the company's fresh start accounting and the impact of the implementation of Statement of Accounting Position 97-2, "Software Revenue Recognition" (SOP 97-2) is available at www.sgi.com.

Conference Call
SGI will conduct a conference call today at 2 p.m. PT to provide additional details. The webcast is available at http://www.sgi.com/. The dial-in number is (877) 495-0297 or (706) 643-9931 for participants outside of North America, conference ID: 8055107. An audio replay of this call will be available after 5 p.m. PT today at (800) 642-1687 (passcode: 8055107) or (706) 645-9291 (passcode: 8055107) and will be available for seven days until midnight on May 15. All links to the archived Webcast and audio replay are available through SGI's Web site at http://www.sgi.com/.

SGI - Innovation for Results™
SGI (NASDAQ: SGIC) is a leader in high-performance computing. SGI delivers a complete range of high-performance server and storage solutions along with industry-leading professional services and support that enable its customers to overcome the challenges of complex data-intensive workflows and accelerate breakthrough discoveries, innovation and information transformation. SGI solutions help customers solve their computing challenges whether it's enhancing the quality of life through drug research, designing and manufacturing safer and more efficient cars and airplanes, studying global climate, providing technologies for homeland security and defense, or helping enterprises manage large data. With offices worldwide, the company is headquartered in Sunnyvale, Calif., and can be found on the Web at www.sgi.com.

© 2007 SGI. All rights reserved. SGI, the SGI cube and the SGI logo are registered trademarks of SGI in the United States and/or other countries worldwide. All other trademarks mentioned herein are the property of their respective owners.

This press release contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth herein, including the risks and uncertainties discussed under the caption "Factors That May Affect Results" and elsewhere in SGI's Form 10-K or Form 10-Q most recently filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. SGI disclaims any intent or obligation to update these forward-looking statements.