Silicon Graphics Reports First Quarter Fiscal Year 2009 Results

Continued Improvement in Operating Results

SUNNYVALE, Calif. (November 4, 2008) — Silicon Graphics, Inc. (SGI) (NASDAQ: SGIC) today announced financial results for the first quarter of fiscal year 2009, which ended September 26, 2008.

SGI's Webcast and conference call to discuss results is Tuesday, November 4 at 2:00 p.m. PST. The Webcast and presentation materials will be available on the SGI Investors Relations Web page at the time of the call at http://www.sgi.com/.

First Quarter FY09 Highlights
Overall in its first quarter, SGI:

• Delivered revenue at the high end of the range provided in the fourth quarter earnings call
• Saw a continued improvement in operating expenses and closely managed working capital
• Continued efforts to expand its Services business and improved quarterly and year-over-year revenue results
• Saw no major impact on customer buying patterns stemming from the current international credit crisis, though the Company continues to carefully control expenses and manage cash in an uncertain economic climate

"Throughout the quarter, SGI continued to hold its own in an economic environment that presented challenges around the world," said Silicon Graphics CEO Robert "Bo" Ewald. "We saw solid Services revenue, continued to deliver our award-winning compute, storage and visualization solutions, and did the hard work necessary to reduce our operating costs."

First Quarter GAAP Results
Revenue for the first quarter was $92.8 million, compared to $93.9 million in the fourth quarter of the prior year and $91.1 million in the first quarter of the prior year, representing a one percent decline and a two percent increase, respectively. Operating expenses were $55.8 million for the first quarter of fiscal 2009, compared to $58.1 million for the previous quarter and $54.7 million in the first quarter of the prior year, representing a four percent decline and a two percent increase, respectively.

Pro Forma Results
Pro forma results comprise non-GAAP financial measures that facilitate comparison of the Company's results of operations to previous fiscal periods. Pro forma revenue was $117.5 million in the first quarter of fiscal 2009, compared to $121.5 million in the fourth quarter of the prior year and $120.7 million in the first quarter of the prior year. 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, which is adjusted for similar items and also for amortization of intangibles, stock-based compensation expense and the non-cash impact of the acquisition of certain Linux Networx assets, was 30 percent for the first quarter of fiscal 2009, compared to 37 percent in the fourth quarter of the prior year and 34 percent in the first quarter of the prior year. Pro forma operating expenses, which exclude restructuring, stock-based compensation expense, amortization of intangibles, the non-cash impact of the acquisition of certain Linux Networx assets, and the impact of fresh start accounting, were $48.5 million in the first quarter of fiscal 2009, compared to $53.2 million in the fourth quarter of the prior year and $51.5 million in the first quarter of the prior year. Adjusted pro forma earnings before interest, taxes, depreciation, amortization, and restructuring (EBITDAR) for the first quarter of fiscal 2009 was a loss of $7.0 million, compared to a loss of $3.0 million for the fourth quarter of the prior year and a loss of $3.8 million in the first quarter of the prior year.

"In reporting our results for what is seasonally a soft quarter, we were on track with the guidance we had provided earlier," said Silicon Graphics Chief Financial Officer Kathy Lanterman. "During the quarter, we were able to reduce spending and, as a result, more effectively manage capital."

"As we look ahead into the remainder of the fiscal year, we are poised to pursue the opportunities presented by several exciting new innovations, including the Silicon Graphics® VUE™ software family, which we launched globally on October 28," added Ewald. "This strategic addition to our line of visualization solutions promises to change the way people create, distribute and use visual information. With VUE, organizations can boost productivity and competitiveness by viewing and interacting with any information, anywhere, and on any device."

The Company uses certain financial measures, including the "pro forma" financial measures, bookings and backlog, that are not determined in accordance with generally accepted accounting principles (GAAP) in the United States. Bookings, also referred to as orders, reflect authorized orders for the Company's products and professional services accepted in the period that are expected to ship in the next twelve months. Backlog is the cumulative bookings for which the Company has not yet recognized revenue. Management believes that these non-GAAP financial measures, bookings and backlog are useful to investors because they facilitate period to period comparisons of SGI performance and because they help investors view the Company's results of operations through the eyes of management and the Company's lenders. The Company's credit line covenants, management reporting and incentive plans are measured against certain of these non-GAAP financial measures.

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 attached to this press release and is also available at www.sgi.com.

Conference Call
SGI will conduct a conference call today at 2 p.m. Pacific Standard Time (PST) to provide additional details. The Webcast and presentation materials are available at http://www.sgi.com/. The conference call can be accessed by dialing (877) 495-0297, or (706) 643-9931 for participants outside of North America, conference ID: 70003451. An audio replay of this call will be available after 5 p.m. PST today at (800) 642-1687 or (706) 645-9291 (passcode: 70003451) and will be available until November 11, 2008. After November 11, 2008, the call will be available as an archived Webcast. All links to the archived webcast, presentation materials and audio replay are available through the SGI web site at www.sgi.com.

Silicon Graphics, Inc.
Silicon Graphics, Inc. (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, California, and can be found on the Web at www.sgi.com.

Note: SGI corporate phone numbers have changed. The new main number for SGI corporate headquarters is 408-524-1980. Effective immediately, all numbers featuring the 650 area code are no longer in service. These changes will not affect the earnings call numbers provided.

© 2008 SGI. All rights reserved. SGI, the SGI cube, Silicon Graphics VUE 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, including statements relating to expense controls, cash management and new products 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 "Risk Factors" 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.