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SGI Achieves 25 Percent Bookings Growth Year-Over-Year

SUNNYVALE, Calif., Aug. 28 /PRNewswire-FirstCall/ -- SGI (Nasdaq: SGIC) today announced financial results for the fourth quarter and fiscal year 2008 ended June 27, 2008. The Company achieved its stated objectives for the fiscal year of strong growth in bookings, a strengthened leadership team, an array of new products and services, and penetration into new customer accounts.

SUNNYVALE, Calif., Aug. 28 /PRNewswire-FirstCall/ — SGI (Nasdaq: SGIC) today announced financial results for the fourth quarter and fiscal year 2008 ended June 27, 2008. The Company achieved its stated objectives for the fiscal year of strong growth in bookings, a strengthened leadership team, an array of new products and services, and penetration into new customer accounts.

Fiscal Year 2008 Highlights In fiscal 2008, SGI: * Grew bookings 25 percent year-over-year to $356 million through a mix of high performance compute, storage and visualization solutions and services. * Saw backlog more than double year-over-year, putting the Company in a stronger position heading into fiscal 2009 with beginning backlog of $147 million compared to $66 million at the end of the prior year. * Strengthened its leadership team with the appointment of key executives including Barb Stinnett to lead the global services organization; Irene Qualters to head the software and storage organization; Douglas Britt to direct worldwide sales; Bob Pette to form a new group focused on leveraging the Company's extensive intellectual property to deliver visualization solutions; and Shahin Khan to drive marketing. * Launched and shipped new products and services including: SGI(R) Altix(R) ICE, an ultra-dense blade platform that began shipping in volume in the first quarter of the fiscal year; SGI(R) Virtu VN200 to power the performance visualization needs of HPC and business users; SGI(R) InfiniteStorage 4600, a new flagship RAID product; the SGI(R) InfiniteStorage NEXIS NAS family of high-performance storage systems; Solutions Support Plus, a new multi-vendor support service; and new cluster nodes and processors aimed at increasing the performance of SGI(R) Altix(R) XE clusters and SGI Altix systems. * Accelerated its Industrial Strength Linux(R) Environment software strategy by acquiring key IP assets formerly owned by Linux Networx. * Delivered and gained acceptance on several significant orders including: a major online trading community, multiple Hollywood and international film and television production companies, the National Basketball Association, Chrysler, Honda Racing, Sikorsky Aircraft, Total Exploration and Production, GENCI (Grand Equipement National de Calcul Intensif), North German Supercomputing Alliance (HLRN), New Mexico Computing Applications Center, NASA, Merck, and Sanofi-Aventis.

"We're very encouraged by the progress we've made over the past fiscal year," said SGI CEO Robert "Bo" Ewald. "We've achieved significant bookings and backlog growth which positions us well as we enter fiscal 2009 to execute on the second year of our three-year plan to achieve a profitable operating structure. With our new products and services, we've seen acceptance of our solutions across all targeted technical and commercial environments."

Fiscal 2008 and Fourth Quarter GAAP Results

Revenue for the fourth quarter was $93.9 million, compared to $79.1 million in the third quarter and $122.3 million in the fourth quarter of the prior year, representing an increase of 19 percent and a decline of 23 percent, respectively. Revenue for fiscal 2008 was $354.1 million, a decline of 24 percent from the prior fiscal year.

The fiscal 2008 operating loss was $127.2 million, compared to a loss of $101.2 million for the prior fiscal year. The fourth quarter operating loss was $28.6 million, compared to $40.6 million in the third quarter and $24.8 million in the fourth quarter of the prior year. Operating expenses for fiscal 2008 were $230.7 million, a decrease of $4.6 million, or 2 percent year-over-year. Operating expenses were $58.1 million for the fourth quarter of fiscal 2008, compared to $59.2 million for the third quarter and $56.9 million in the fourth quarter of the prior year.

For purposes of comparison, fiscal year 2007 figures comprise three months of results, ended September 29, 2006, for the Company existing before the Company's reorganization and emergence, and 9 months of results, ended June 29, 2007, for the Company existing after the reorganization.

Pro Forma Results

Pro forma results comprise non-GAAP financial measures that facilitate comparison of the Company's results of operations in previous fiscal years. Pro forma revenue was $121.5 million in the fourth quarter of fiscal 2008, compared to $80.9 million in the third quarter of fiscal 2008. 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 fourth quarter of fiscal 2008, which is adjusted for similar items and also for amortization of intangibles and stock-based compensation, was 37 percent, compared with 27 percent in the third quarter of fiscal 2008. Pro forma operating expenses, which exclude restructuring, stock- based compensation expense, amortization of intangibles, the non-cash impact of Linux Networx asset acquisition, and the impact of fresh start accounting, were $53.2 million in the fourth quarter of fiscal 2008 and $52.7 million in the third quarter of fiscal 2008. Adjusted pro forma earnings before interest, taxes, depreciation, amortization, and restructuring (EBITDAR) for the fourth quarter of fiscal 2008 was a loss of $3.0 million, compared with a loss of $25.7 million for the third quarter of fiscal 2008.

"We are pleased with bookings performance year-over-year as a leading indicator of the market's acceptance of our solutions," said Kathy Lanterman, SGI's Chief Financial Officer. "Our fiscal 2008 financial goals were to generate double-digit bookings growth, stabilize revenue and manage cash and expenses. We largely achieved these goals, particularly through the growth in our core products bookings, although the timing of customer acceptances did impact revenue for the year."

Ewald added that new server, storage and visualization products helped drive bookings growth by giving SGI the winning edge in several competitive sales situations, including a contract to supply NASA with its next major supercomputer. "These new products have allowed us to capture some of the world's most coveted HPC wins, while placing us in new accounts like a major online trading community," said Ewald. "Developments like these give us great confidence about the validity of our strategy and direction."

In this press release, SGI 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 SGI 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. SGI 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 http://www.sgi.com/company_info/investors.

Anthony Grillo Named Chairman of SGI Board of Directors

As it embarks on the second phase of its growth strategy, SGI also announced today that Anthony Grillo has been named the Chairman of its Board of Directors. Grillo has served on the SGI Board of Directors since October of 2006.

"I look forward to continuing to work closely with management and my fellow Board members," said Grillo, who is founder and CEO of American Securities Advisors, LLC.

The company also announced that Kevin Katari and Chun Won Yi have resigned from its Board of Directors. Both have been members of the Board since October of 2006, with Katari serving as Chairman since joining the Board.

"I am pleased to have worked with the Company during this transition, and I have confidence in Bo and Tony in leading SGI forward," said Katari.

Yi added, "I have enjoyed being on the Board and assisting SGI since its successful reorganization, and the Company continues to have my full support."

"I would like to express SGI's appreciation and thanks to both Kevin and Chun," said SGI CEO Bo Ewald. "They have worked closely with the Company and we look forward to continuing our relationship with them as significant investors."

Conference Call

SGI will conduct a conference call today at 2 p.m. Pacific Daylight Time (PDT) to provide additional details. The webcast and presentation materials are available at http://www.sgi.com/company_info/investors/webcast.html. The conference call can be accessed by dialing (877) 495-0297, or (706) 643-9931 for participants outside of North America, conference ID: 59920311. An audio replay of this call will be available after 5 p.m. PDT today at (800) 642-1687 or (706) 645-9291 (passcode: 59920311) and will be available until September 4, 2008. All links to the archived webcast, presentation materials and audio replay are available through the SGI web site at http://www.sgi.com/company_info/investors/.

Additional Resources:

* National Basketball Association (press release April 14, 2008) http://www.sgi.com/company_info/newsroom/press_releases/2008/april/nba.html

* "Supporting Honda's Environmental Approach to Formula One" article

in SGI Magazine http://www.sgi.com/subscribe/sgi_magazine/08_june/08SupportingHonda.html

* Total Exploration Production (press announcement June 15, 2008) http://www.sgi.com/company_info/newsroom/press_releases/2008/june/top10.html

* GENCI (Grand Equipement National de Calcul Intensif) (press release

June 17, 2008) http://www.sgi.com/company_info/newsroom/press_releases/2008/june/genci.html

* North German Supercomputing Alliance (HLRN) (press release July 3,

2008)

http://www.sgi.com/company_info/newsroom/press_releases/2008/july/hlrn.html

* New Mexico Computing Applications Center (press release January 28,

2008)

www.sgi.com/company_info/newsroom/press_releases/2008/january/nmcac.html

* NASA (press release May 6, 2008) http://www.sgi.com/company_info/newsroom/press_releases/2008/may/nasa.html

SGI – Innovation for Results(TM)

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 http://www.sgi.com.

(C) 2008 SGI. All rights reserved. SGI, the SGI cube, Altix, and the SGI logo are registered trademarks and CXFS and Virtu are 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 continued execution of the SGI's strategic plan and market acceptance of SGI's solutions, 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.

MEDIA CONTACT Marla Robinson marlar@sgi.com 256.773.2371 SGI PR HOTLINE 650.933.7777 SGI PR FACSIMILE 650.933.0714 Calculation of Non-GAAP Revenue by Reporting Segment Successor Company Three Months Ended: 27-Jun-08 28-Mar-08 28-Dec-07 28-Sep-07 (in thousands) Core systems: Shared memory products (GAAP) $23,746 $15,031 $19,312 $21,318 Plus: Fresh-start accounting adjustments – 306 196 22 SOP 97-2 revenue deferrals (601) (1,949) 6,167 16,788 Non-GAAP shared memory products revenue 23,145 13,388 25,675 38,128 Cluster products (GAAP) 8,194 7,672 3,970 10,309 Plus: Fresh-start accounting adjustments – – – – SOP 97-2 revenue deferrals 16,735 1,603 6,157 4,099 Non-GAAP cluster products revenue 24,929 9,275 10,127 14,408 Storage products revenue (GAAP) 10,330 8,374 13,505 8,233 Plus: Fresh-start accounting adjustments – – – – SOP 97-2 revenue deferrals 4,203 203 2,303 3,377 Non-GAAP storage products revenue 14,533 8,577 15,808 11,610 Non-GAAP core systems revenue 62,607 31,240 51,610 64,146 Legacy systems: Server products (GAAP) 3,800 4,523 6,216 4,887 Plus: Fresh-start accounting adjustments – – – – SOP 97-2 revenue deferrals 2,439 (296) 1,223 516 Non-GAAP server products revenue 6,239 4,227 7,439 5,403 Storage products (GAAP) 246 332 410 849 Plus: Fresh-start accounting adjustments – – – – SOP 97-2 revenue deferrals 466 (52) (33) (92) Non-GAAP storage products revenue 712 280 377 757 Non-GAAP legacy systems revenue 6,951 4,507 7,816 6,160 Global services: Customer support (GAAP) 36,784 35,163 40,193 38,231 Plus: Fresh-start accounting adjustments 1,557 1,345 1,898 3,813 SOP 97-2 revenue deferrals 171 (316) (2,215) 77 Non-GAAP customer support revenue 38,512 36,192 39,876 42,121 Professional services (GAAP) 10,769 7,983 6,505 7,258 Plus: Fresh-start accounting adjustments – 395 – – SOP 97-2 revenue deferrals 2,622 554 3,333 1,048 Non-GAAP professional services revenue 13,391 8,932 9,838 8,306 Non-GAAP global services revenue 51,903 45,124 49,714 50,427 Non-GAAP revenue $121,461 $80,871 $109,140 $120,733 Successor Company Predecessor Company Three Months Ended: 29-Jun-07 30-Mar-07 29-Dec-06 29-Sep-06 (in thousands) Core systems: Shared memory products (GAAP) $43,526 $30,328 $39,237 $34,331 Plus: Fresh-start accounting adjustments 332 1,100 1,091 – SOP 97-2 revenue deferrals 4,955 4,834 3,912 2,304 Non-GAAP shared memory products revenue 48,813 36,262 44,240 36,635 Cluster products (GAAP) 4,400 2,364 1,717 583 Plus: Fresh-start accounting adjustments – – 18 – SOP 97-2 revenue deferrals 1,112 23 163 – Non-GAAP cluster products revenue 5,512 2,387 1,898 583 Storage products revenue (GAAP) 14,486 12,063 10,920 12,750 Plus: Fresh-start accounting adjustments 293 – 320 – SOP 97-2 revenue deferrals 5,392 2,676 3,834 1,584 Non-GAAP storage products revenue 20,171 14,739 15,074 14,334 Non-GAAP core systems revenue 74,496 53,388 61,212 51,552 Legacy systems: Server products (GAAP) 11,265 12,612 10,966 12,324 Plus: Fresh-start accounting adjustments – 37 1,588 – SOP 97-2 revenue deferrals 176 600 703 (504) Non-GAAP server products revenue 11,441 13,249 13,257 11,820 Storage products (GAAP) 581 1,204 842 618 Plus: Fresh-start accounting adjustments – – 364 – SOP 97-2 revenue deferrals 83 34 192 (76) Non-GAAP storage products revenue 664 1,238 1,398 542 Non-GAAP legacy systems revenue 12,105 14,487 14,655 12,362 Global services: Customer support (GAAP) 39,332 37,527 35,080 48,396 Plus: Fresh-start accounting adjustments 4,789 6,545 12,228 – SOP 97-2 revenue deferrals 677 159 231 144 Non-GAAP customer support revenue 44,798 44,231 47,539 48,540 Professional services (GAAP) 8,705 14,948 8,961 12,803 Plus: Fresh-start accounting adjustments 58 647 268 – SOP 97-2 revenue deferrals 1,331 2,066 1,509 1,702 Non-GAAP professional services revenue 10,094 17,661 10,738 14,505 Non-GAAP global services revenue 54,892 61,892 58,277 63,045 Non-GAAP revenue $141,493 $129,767 $134,144 $126,959 SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts, unaudited) Predecessor Successor Company Company Nine Three Year Months Months Three Months Ended Ended Ended Ended Jun. 27 Jun. 29, Jun. 27, Jun. 29, Sep. 29, 2008 2007 2008 2007 2006 Product and other revenue $39,909 $73,008 $150,103 $187,805 $45,229 Product revenue from related party(1) 6,407 1,250 21,154 8,706 15,377 Global services revenue 47,553 48,037 182,886 144,553 61,199 Total revenue 93,869 122,295 354,143 341,064 121,805 Costs and expenses: Cost of product and other revenue 32,743 61,114 137,411 162,362 42,710 Cost of global services revenue 31,608 29,034 113,253 91,446 32,265 Research and development (2) 14,308 14,870 58,588 44,040 16,007 Selling, general and administrative 43,179 41,697 171,050 125,320 42,359 Other operating expense, net 603 358 1,028 3,601 3,926 Total costs and expenses 122,441 147,073 481,330 426,769 137,267 Operating loss (28,572) (24,778) (127,187) (85,705) (15,462) Interest expense (1,691) (1,340) (6,312) (4,532) (7,688) Interest expense from related parties (1,602) (1,545) (6,893) (4,347) – Interest and other income (expense), net (3) (1,154) (1,728) (3,511) (355) 11,391 Loss before reorganization items and income taxes (33,019) (29,391) (143,903) (94,939) (11,759) Reorganization items, net – – – – 340,397 Income (loss) before income taxes (33,019) (29,391) (143,903) (94,939) 328,638 Income tax provision 2,134 7,537 9,352 8,703 2,382 Net income (loss) $(35,153) $(36,928) $(153,255) $(103,642) $326,256 Net income (loss) per share: Basic $(3.03) $(3.32) $(13.55) $(9.32) $1.20 Diluted $(3.03) $(3.32) $(13.55) $(9.32) $0.77 Weighted-average shares used to compute net income (loss) per share: Basic 11,585 11,125 11,307 11,125 271,563 Diluted 11,585 11,125 11,307 11,125 423,875 (1) Represents product sales to SGI Japan, a related party of which we owned a 10% interest at June 27, 2008 and at September 29, 2006. (2) Fiscal 2008 includes approximately $2 million of in-process research and development resulting from our acquisition of certain assets formerly owned by Linux Networx, Inc. (3) Fiscal 2008 includes a gain of approximately $4 million on the sale of our investment in MicroUnity Systems Engineering, Inc. and a write-down of approximately $6 million of our equity investment in SGI Japan to the estimated fair value of the investment, which was approximately $15 million at June 27, 2008. The three-month period ended September 29, 2006 includes a pre-tax gain of approximately $10 million on the sale of a portion of the Predecessor Company's investment in SGI Japan. SILICON GRAPHICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 27, 2008 June 29, 2007 (Unaudited) ASSETS Current assets: Cash and cash equivalents $39,552 $69,887 Short-term marketable investments 258 223 Short-term restricted investments 4,292 6,763 Accounts receivable, net 53,816 47,643 Inventories 72,601 54,354 Prepaid expenses 7,772 6,153 Other current assets 51,720 49,576 Total current assets 230,011 234,599 Restricted investments 1,872 302 Property and equipment, net 40,917 43,392 Other intangibles, net 55,399 71,264 Other non-current assets, net 86,996 59,501 Total assets $415,195 $409,058 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $34,492 $14,387 Accrued compensation 28,878 35,382 Income taxes payable 2,798 2,209 Other current liabilities 38,502 44,420 Current portion of long-term debt 12,750 261 Current portion of deferred revenue 126,138 84,798 Current portion of restructuring liability 1,242 1,410 Total current liabilities 244,800 182,867 Long-term debt 119,750 85,000 Non-current portion of deferred revenue 70,524 32,362 Long-term income taxes payable 23,715 20,902 Other non-current liabilities 12,782 3,468 Total liabilities 471,571 324,599 Total stockholders' equity (deficit) (56,376) 84,459 Total liabilities and stockholders' equity $415,195 $409,058 Calculation of Non-GAAP Quarterly Backlog Successor Company Three Months Ended: 27-Jun-08 28-Mar-08 28-Dec-07 28-Sep-07 29-Jun-07 (in thousands) Total beginning backlog (GAAP) $202,146 $163,215 $112,847 $88,679 $117,751 Plus: Bookings 96,226 82,846 100,286 77,022 53,891 Products and professional services revenue (GAAP) (57,085) (43,915) (49,918) (52,854) (82,963) Total ending backlog (GAAP) $241,287 $202,146 $163,215 $112,847 $88,679 Total non-GAAP beginning backlog $133,746 $95,579 $64,557 $66,147 $108,951 Plus: Bookings 96,226 82,846 100,286 77,022 53,891 Non-GAAP products and professional services revenue (82,949) (44,679) (69,264) (78,612) (96,695) Total non-GAAP ending backlog $147,023 $133,746 $95,579 $64,557 $66,147 Calculation of Non-GAAP Quarterly Products Standard Profit Margin Successor Company Three Months Ended: 27-Jun-08 28-Mar-08 28-Dec-07 28-Sep-07 29-Jun-07 (in thousands) Total products revenue (GAAP) $46,316 $35,932 $43,413 $45,596 $74,258 Less: Other revenue (305) (1,015) (286) (395) (810) Plus: Fresh-start accounting adjustments – 306 196 22 625 SOP 97-2 revenue deferrals 23,242 (491) 15,817 24,688 11,718 Non-GAAP total products revenue 69,253 34,732 59,140 69,911 85,791 Products standard cost of revenue (GAAP) 23,575 20,549 24,919 28,163 48,084 Plus: Fresh-start accounting adjustments – (441) (2,521) (1,555) (5,144) SOP 97-2 revenue deferrals 14,290 (50) 9,913 18,092 7,966 Non-GAAP products standard cost of revenue 37,865 20,058 32,311 44,700 50,906 Products standard margin (GAAP) 22,436 14,368 18,208 17,038 25,364 Plus: Fresh-start accounting adjustments – 747 2,717 1,577 5,769 SOP 97-2 revenue deferrals 8,952 (441) 5,904 6,596 3,752 Non-GAAP products standard margin 31,388 14,674 26,829 25,211 34,885 Non-GAAP products standard margin 45.3% 42.2% 45.4% 36.1% 40.7% Calculation of Non-GAAP Quarterly Results of Operations and EBITDAR Successor Company Three Months Ended: 27-Jun-08 28-Mar-08 28-Dec-07 28-Sep-07 (in thousands) Total revenue (GAAP) $93,869 $79,078 $90,111 $91,085 Plus: Fresh-start accounting adjustments 1,557 2,046 2,094 3,835 SOP 97-2 revenue deferrals (1) 26,035 (253) 16,935 25,813 Non-GAAP total revenue 121,461 80,871 109,140 120,733 Cost of revenue (GAAP) 64,351 60,484 62,248 63,581 Plus: Fresh-start accounting adjustments (1,274) (1,492) (3,834) (2,762) SOP 97-2 revenue deferrals (1) 13,738 286 11,794 18,576 Depreciation & amortization – Linux Networx (130) (45) – – Stock-based compensation expense (90) (84) 8 (87) Non-GAAP cost of revenue 76,595 59,149 70,216 79,308 Research and development expense (GAAP) 14,308 16,520 14,464 13,296 Plus: Fresh-start accounting adjustments (169) (108) (12) 47 Depreciation & amortization – Linux Networx (226) (60) – – Write-off of in-process R&D – Linux Networx – (2,400) – – Stock-based compensation expense (317) (320) (253) (309) Non-GAAP research and development expense 13,596 13,632 14,199 13,034 Selling, general and administrative expenses (GAAP) 43,179 42,484 44,163 41,224 Plus: Fresh-start accounting adjustments (2,710) (2,545) (2,525) (2,076) Restructuring and bankruptcy related expenses – – – – Goodwill impairment – – – – Depreciation & amortization – Linux Networx (173) (118) – – Stock-based compensation expense (724) (705) (530) (718) Non-GAAP selling, general and administrative expenses 39,572 39,116 41,108 38,430 Other operating expenses (GAAP) 603 230 20 175 Plus: Restructuring and bankruptcy related expenses (603) (230) (20) (175) Non-GAAP other operating expenses – – – – Operating expenses (GAAP) 58,090 59,234 58,647 54,695 Plus: Fresh-start accounting adjustments (2,879) (2,653) (2,537) (2,029) Stock-based compensation expense (1,041) (1,025) (783) (1,027) Goodwill impairment – – – – Depreciation & amortization – Linux Networx (399) (178) – – Write-off of in-process R&D – Linux Networx – (2,400) – – Restructuring and bankruptcy related expenses (603) (230) (20) (175) Non-GAAP operating expenses 53,168 52,748 55,307 51,464 Operating income (loss) (GAAP) (28,572) (40,640) (30,784) (27,191) Plus: Fresh-start accounting adjustments 5,710 6,191 8,465 8,626 SOP 97-2 revenue deferrals (1) 12,297 (539) 5,141 7,237 Stock-based compensation expense 1,131 1,109 775 1,114 Goodwill impairment – – – – Depreciation & amortization – Linux Networx 529 223 – – Write-off of in-process R&D – Linux Networx – 2,400 – – Restructuring and bankruptcy related expenses 603 230 20 175 Non-GAAP operating income (loss) (2): (8,302) (31,026) (16,383) (10,039) Plus: Depreciation 5,306 5,375 5,414 6,224 EBITDAR (2,996) (25,651) (10,969) (3,815) Successor Company Three Months Ended: 29-Jun-07 30-Mar-07 29-Dec-06 (in thousands) Total revenue (GAAP) $122,295 $111,046 $107,723 Plus: Fresh-start accounting adjustments 5,472 8,329 15,877 SOP 97-2 revenue deferrals (1) 13,726 10,392 10,544 Non-GAAP total revenue 141,493 129,767 134,144 Cost of revenue (GAAP) 90,148 74,355 89,305 Plus: Fresh-start accounting adjustments (6,644) (4,703) (12,549) SOP 97-2 revenue deferrals (1) 8,213 3,574 6,293 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense (57) (45) (12) Non-GAAP cost of revenue 91,660 73,181 83,037 Research and development expense (GAAP) 14,870 14,186 14,984 Plus: Fresh-start accounting adjustments 65 52 (348) Depreciation & amortization – Linux Networx – – – Write-off of in-process R&D – Linux Networx – – – Stock-based compensation expense (257) (200) (58) Non-GAAP research and development expense 14,678 14,038 14,578 Selling, general and administrative expenses (GAAP) 41,697 42,017 41,606 Plus: Fresh-start accounting adjustments (2,580) (2,587) (2,635) Restructuring and bankruptcy related expenses – – – Goodwill impairment – – – Depreciation & amortization – Linux Networx – – – Stock-based compensation expense (581) (949) (54) Non-GAAP selling, general and administrative expenses 38,536 38,481 38,917 Other operating expenses (GAAP) 358 358 2,885 Plus: Restructuring and bankruptcy related expenses (358) (358) (2,885) Non-GAAP other operating expenses – – – Operating expenses (GAAP) 56,925 56,561 59,475 Plus: Fresh-start accounting adjustments (2,515) (2,535) (2,983) Stock-based compensation expense (838) (1,149) (112) Goodwill impairment – – – Depreciation & amortization – Linux Networx – – – Write-off of in-process R&D – Linux Networx – – – Restructuring and bankruptcy related expenses (358) (358) (2,885) Non-GAAP operating expenses 53,214 52,519 53,495 Operating income (loss) (GAAP) (24,778) (19,870) (41,057) Plus: Fresh-start accounting adjustments 14,631 15,567 31,409 SOP 97-2 revenue deferrals (1) 5,513 6,818 4,251 Stock-based compensation expense 895 1,194 124 Goodwill impairment – – – Depreciation & amortization – Linux Networx – – – Write-off of in-process R&D – Linux Networx – – – Restructuring and bankruptcy related expenses 358 358 2,885 Non-GAAP operating income (loss) (2): (3,381) 4,067 (2,388) Plus: Depreciation 6,169 6,128 6,552 EBITDAR 2,788 10,195 4,164 Predecessor Company Three Months Ended: 29-Sep-06 30-Jun-06 31-Mar-06 30-Dec-05 30-Sep-05 (in thousands) Total revenue (GAAP) $121,805 $115,708 $105,562 $136,796 $160,739 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 5,154 13,476 2,112 7,597 8,938 Non-GAAP total revenue 126,959 129,184 107,674 144,393 169,677 Cost of revenue (GAAP) 74,975 70,532 68,227 80,952 100,722 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 2,795 4,675 1,334 3,366 4,810 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense 7 22 (53) (71) (228) Non-GAAP cost of revenue 77,777 75,229 69,508 84,247 105,304 Research and development expense (GAAP) 16,007 18,220 20,838 21,254 23,365 Plus: Fresh-start accounting adjustments – – – – – Depreciation & amortization – Linux Networx – – – – – Write-off of in- process R&D – Linux Networx – – – – – Stock-based compensation expense 5 32 (112) (231) (300) Non-GAAP research and development expense 16,012 18,252 20,726 21,023 23,065 Selling, general and administrative expenses (GAAP) 42,359 42,903 59,722 57,627 59,865 Plus: Fresh-start accounting adjustments – – – – – Restructuring and bankruptcy related expenses – – (3,452) (6,413) (2,082) Goodwill impairment – – (8,386) – – Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense (134) (64) (344) (381) (455) Non-GAAP selling, general and administrative expenses 42,225 42,839 47,540 50,833 57,328 Other operating expenses (GAAP) 3,926 (7,694) 11,550 10,114 7,185 Plus: Restructuring and bankruptcy related expenses (3,926) 7,694 (11,550) (10,114) (7,185) Non-GAAP other operating expenses – – – – – Operating expenses (GAAP) 62,292 53,429 92,110 88,995 90,415 Plus: Fresh-start accounting adjustments – – – – – Stock-based compensation expense (129) (32) (456) (612) (755) Goodwill impairment – – (8,386) – – Depreciation & amortization – Linux Networx – – – – – Write-off of in- process R&D – Linux Networx – – – – – Restructuring and bankruptcy related expenses (3,926) 7,694 (15,002) (16,527) (9,267) Non-GAAP operating expenses 58,237 61,091 68,266 71,856 80,393 Operating income (loss) (GAAP) (15,462) (8,253) (54,775) (33,151) (30,398) Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 2,359 8,801 778 4,231 4,128 Stock-based compensation expense 122 10 509 683 983 Goodwill impairment – – 8,386 – – Depreciation & amortization – Linux Networx – – – – – Write-off of in- process R&D – Linux Networx – – – – – Restructuring and bankruptcy related expenses 3,926 (7,694) 15,002 16,527 9,267 Non-GAAP operating income (loss) (2): (9,055) (7,136) (30,100) (11,710) (16,020) Plus: Depreciation 6,467 10,003 10,898 11,959 13,379 EBITDAR (2,588) 2,867 (19,202) 249 (2,641) Three Months Ended: FY2008 FY2007 FY2006 (in thousands) Total revenue (GAAP) $354,143 $462,869 $518,805 Plus: Fresh-start accounting adjustments 9,532 29,678 – SOP 97-2 revenue deferrals (1) 68,530 39,816 32,123 Non-GAAP total revenue 432,205 532,363 550,928 Cost of revenue (GAAP) 250,664 328,783 320,433 Plus: Fresh-start accounting adjustments (9,362) (23,896) – SOP 97-2 revenue deferrals (1) 44,394 20,875 14,185 Depreciation & amortization – Linux Networx (175) – – Stock-based compensation expense (253) (107) (330) Non-GAAP cost of revenue 285,268 325,655 334,288 Research and development expense (GAAP) 58,588 60,047 83,677 Plus: Fresh-start accounting adjustments (242) (231) – Depreciation & amortization – Linux Networx (286) – – Write-off of in-process R&D – Linux Networx (2,400) – – Stock-based compensation expense (1,199) (510) (611) Non-GAAP research and development expense 54,461 59,306 83,066 Selling, general and administrative expenses (GAAP) 171,050 167,679 220,117 Plus: Fresh-start accounting adjustments (9,856) (7,802) – Restructuring and bankruptcy related expenses – – (11,947) Goodwill impairment – – (8,386) Depreciation & amortization – Linux Networx (291) – – Stock-based compensation expense (2,677) (1,718) (1,244) Non-GAAP selling, general and administrative expenses 158,226 158,159 198,540 Other operating expenses (GAAP) 1,028 7,527 21,155 Plus: Restructuring and bankruptcy related expenses (1,028) (7,527) (21,155) Non-GAAP other operating expenses – – – Operating expenses (GAAP) 230,666 235,253 324,949 Plus: Fresh-start accounting adjustments (10,098) (8,033) – Stock-based compensation expense (3,876) (2,228) (1,855) Goodwill impairment – – (8,386) Depreciation & amortization – Linux Networx (577) – – Write-off of in-process R&D – Linux Networx (2,400) – – Restructuring and bankruptcy related expenses (1,028) (7,527) (33,102) Non-GAAP operating expenses 212,687 217,465 281,606 Operating income (loss) (GAAP) (127,187) (101,167) (126,577) Plus: Fresh-start accounting adjustments 28,992 61,607 – SOP 97-2 revenue deferrals (1) 24,136 18,941 17,938 Stock-based compensation expense 4,129 2,335 2,185 Goodwill impairment – – 8,386 Depreciation & amortization – Linux Networx 752 – – Write-off of in-process R&D – Linux Networx 2,400 – – Restructuring and bankruptcy related expenses 1,028 7,527 33,102 Non-GAAP operating income (loss) (2): (65,750) (10,757) (64,966) Plus: Depreciation 22,319 25,316 46,239 EBITDAR (43,431) 14,559 (18,727) Calculation of Non-GAAP Revenues by Reporting Segment(1) Successor Company Three Months Ended: 27-Jun-08 28-Mar-08 28-Dec-07 28-Sep-07 (in thousands) Core systems: Server products (GAAP) $31,940 $22,703 $23,282 $31,627 Plus: Fresh-start accounting adjustments – 306 196 22 SOP 97-2 revenue deferrals (2) 16,134 (346) 12,324 20,887 Non-GAAP server products revenue $48,074 22,663 35,802 52,536 Storage products revenue (GAAP) 10,330 8,374 13,505 8,233 Plus: Fresh-start accounting adjustments – – – – SOP 97-2 revenue deferrals (2) 4,203 203 2,303 3,377 Non-GAAP storage products revenue 14,533 8,577 15,808 11,610 Non-GAAP core systems revenue 62,607 31,240 51,610 64,146 Legacy systems: Legacy systems (GAAP) 4,046 4,855 6,626 5,736 Plus: Fresh-start accounting adjustments – – – – SOP 97-2 revenue deferrals (2) 2,905 (348) 1,190 424 Non-GAAP legacy systems revenue 6,951 4,507 7,816 6,160 Non-GAAP products revenue 69,558 35,747 59,426 70,306 Global services: Customer support (GAAP) 36,784 35,163 40,193 38,231 Plus: Fresh-start accounting adjustments 1,557 1,345 1,898 3,813 SOP 97-2 revenue deferrals (2) 171 (316) (2,215) 77 Non-GAAP customer support revenue 38,512 36,192 39,876 42,121 Professional services (GAAP) 10,769 7,983 6,505 7,258 Plus: Fresh-start accounting adjustments – 395 – – SOP 97-2 revenue deferrals (2) 2,622 554 3,333 1,048 Non-GAAP professional services revenue 13,391 8,932 9,838 8,306 Non-GAAP global services revenue 51,903 45,124 49,714 50,427 Non-GAAP revenue $121,461 $80,871 $109,140 $120,733 Successor Company Three Months Ended: 29-Jun-07 30-Mar-07 29-Dec-06 (in thousands) Core systems: Server products (GAAP) $47,926 $32,692 $40,954 Plus: Fresh-start accounting adjustments 332 1,100 1,109 SOP 97-2 revenue deferrals (2) 6,067 4,857 4,075 Non-GAAP server products revenue 54,325 38,649 46,138 Storage products revenue (GAAP) 14,486 12,063 10,920 Plus: Fresh-start accounting adjustments 293 – 320 SOP 97-2 revenue deferrals (2) 5,392 2,676 3,834 Non-GAAP storage products revenue 20,171 14,739 15,074 Non-GAAP core systems revenue 74,496 53,388 61,212 Legacy systems: Legacy systems (GAAP) 11,846 13,816 11,808 Plus: Fresh-start accounting adjustments – 37 1,952 SOP 97-2 revenue deferrals (2) 259 634 895 Non-GAAP legacy systems revenue 12,105 14,487 14,655 Non-GAAP products revenue 86,601 67,875 75,867 Global services: Customer support (GAAP) 39,332 37,527 35,080 Plus: Fresh-start accounting adjustments 4,789 6,545 12,228 SOP 97-2 revenue deferrals (2) 677 159 231 Non-GAAP customer support revenue 44,798 44,231 47,539 Professional services (GAAP) 8,705 14,948 8,961 Plus: Fresh-start accounting adjustments 58 647 268 SOP 97-2 revenue deferrals (2) 1,331 2,066 1,509 Non-GAAP professional services revenue 10,094 17,661 10,738 Non-GAAP global services revenue 54,892 61,892 58,277 Non-GAAP revenue $141,493 $129,767 $134,144 Predecessor Company Three Months Ended: 29-Sep-06 30-Jun-06 31-Mar-06 30-Dec-05 30-Sep-05 (in thousands) Core systems: Server products (GAAP) $34,914 $21,168 $20,484 $28,182 $53,993 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (2) 2,304 3,895 30 2,485 2,524 Non-GAAP server products revenue 37,218 25,063 20,514 30,667 56,517 Storage products revenue (GAAP) 12,750 13,134 11,798 11,185 13,816 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (2) 1,584 1,288 854 2,070 2,766 Non-GAAP storage products revenue 14,334 14,422 12,652 13,255 16,582 Non-GAAP core systems revenue 51,552 39,485 33,166 43,922 73,099 Legacy systems: Legacy systems (GAAP) 12,942 14,701 13,810 27,095 22,729 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (2) (580) 7,169 1,338 2,933 2,940 Non-GAAP legacy systems revenue 12,362 21,870 15,148 30,028 25,669 Non-GAAP products revenue 63,914 61,355 48,314 73,950 98,768 Global services: Customer support (GAAP) 48,396 49,552 52,053 55,304 57,174 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (2) 144 1,299 (190) (317) 97 Non-GAAP customer support revenue 48,540 50,851 51,863 54,987 57,271 Professional services (GAAP) 12,803 17,153 7,417 15,030 13,027 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (2) 1,702 (175) 80 426 611 Non-GAAP professional services revenue 14,505 16,978 7,497 15,456 13,638 Non-GAAP global services revenue 63,045 67,829 59,360 70,443 70,909 Non-GAAP revenue $126,959 $129,184 $107,674 $144,393 $169,677 Three Months Ended: FY2008 FY2007 FY2006 (in thousands) Core systems: Server products (GAAP) $109,552 $156,486 $123,827 Plus: Fresh-start accounting adjustments 524 2,541 – SOP 97-2 revenue deferrals (2) 48,999 17,303 8,934 Non-GAAP server products revenue 159,075 176,330 132,761 Storage products revenue (GAAP) 40,442 50,219 49,933 Plus: Fresh-start accounting adjustments – 613 – SOP 97-2 revenue deferrals (2) 10,086 13,486 6,978 Non-GAAP storage products revenue 50,528 64,318 56,911 Non-GAAP core systems revenue 209,603 240,648 189,672 Legacy systems: Legacy systems (GAAP) 21,263 50,412 78,335 Plus: Fresh-start accounting adjustments – 1,989 – SOP 97-2 revenue deferrals (2) 4,171 1,208 14,380 Non-GAAP legacy systems revenue 25,434 53,609 92,715 Non-GAAP products revenue 235,037 294,257 282,387 Global services: Customer support (GAAP) 150,371 160,335 214,083 Plus: Fresh-start accounting adjustments 8,613 23,562 – SOP 97-2 revenue deferrals (2) (2,283) 1,211 889 Non-GAAP customer support revenue 156,701 185,108 214,972 Professional services (GAAP) 32,515 45,417 52,627 Plus: Fresh-start accounting adjustments 395 973 – SOP 97-2 revenue deferrals (2) 7,557 6,608 942 Non-GAAP professional services revenue 40,467 52,998 53,569 Non-GAAP global services revenue 197,168 238,106 268,541 Non-GAAP revenue $432,205 $532,363 $550,928 (1) For each of the periods indicated, non-GAAP core systems revenue is obtained by adding non-GAAP server products revenue and non-GAAP storage products revenue, non-GAAP products revenue is obtained by adding non-GAAP core systems revenue and non-GAAP legacy systems revenue, non-GAAP global services revenue is obtained by adding non- GAAP customer support revenue and non-GAAP professional services revenue and non-GAAP revenue is obtained by adding non-GAAP products revenue and non-GAAP global services revenue. This table includes a reconciliation of each listed component to the comparable GAAP figures. (2) The non-GAAP adjustments for SOP 97-2 are indicative of the revenue results the company would have recorded without the effect of SOP 97-2, although these are unaudited adjustments. We believe that this presentation more closely matches the results that would have been recorded had SAB 104 been applied, in which case the revenue for the hardware components of the arrangement would have been recorded when those deliverables were completed, and the primary remaining deliverable is customer support. Generally, this presentation matches the timing of billings to customers for the hardware deliverables, and therefore allows more transparency to cashflows. Successor Company Three Months Ended: 27-Jun-08 28-Mar-08 28-Dec-07 28-Sep-07 (in thousands) Products revenue (GAAP) $46,316 $35,932 $43,413 $45,596 Plus: Fresh-start accounting adjustments – 306 196 22 SOP 97-2 revenue deferrals (1) 23,242 (491) 15,817 24,688 Non-GAAP products revenue 69,558 35,747 59,426 70,306 Global services revenue (GAAP) 47,553 43,146 46,698 45,489 Plus: Fresh-start accounting adjustments 1,557 1,740 1,898 3,813 SOP 97-2 revenue deferrals (1) 2,793 238 1,118 1,125 Non-GAAP global services revenue 51,903 45,124 49,714 50,427 Total revenue (GAAP) 93,869 79,078 90,111 91,085 Plus: Fresh-start accounting adjustments 1,557 2,046 2,094 3,835 SOP 97-2 revenue deferrals (1) 26,035 (253) 16,935 25,813 Non-GAAP total revenue 121,461 80,871 109,140 120,733 Products cost of revenue (GAAP) 32,743 32,038 34,938 37,692 Plus: Fresh-start accounting adjustments (1,196) (1,588) (3,789) (2,718) SOP 97-2 revenue deferrals (1) 14,290 (50) 9,913 18,092 Depreciation & amortization – Linux Networx (50) (24) – – Stock-based compensation expense (38) (39) (34) (27) Non-GAAP products cost of revenue 45,749 30,337 41,028 53,039 Global services cost of revenue (GAAP) 31,608 28,446 27,310 25,889 Plus: Fresh-start accounting adjustments (78) 96 (45) (44) SOP 97-2 revenue deferrals (1) (552) 336 1,881 484 Depreciation & amortization – Linux Networx (80) (21) – – Stock-based compensation expense (52) (45) 42 (60) Non-GAAP global services cost of revenue 30,846 28,812 29,188 26,269 Cost of revenue (GAAP) 64,351 60,484 62,248 63,581 Plus: Fresh-start accounting adjustments (1,274) (1,492) (3,834) (2,762) SOP 97-2 revenue deferrals (1) 13,738 286 11,794 18,576 Depreciation & amortization – Linux Networx (130) (45) – – Stock-based compensation expense (90) (84) 8 (87) Non-GAAP cost of revenue 76,595 59,149 70,216 79,308 Products gross profit (GAAP) 13,573 3,894 8,475 7,904 Plus: Fresh-start accounting adjustments 1,196 1,894 3,985 2,740 SOP 97-2 revenue deferrals (1) 8,952 (441) 5,904 6,596 Depreciation & amortization – Linux Networx 50 24 – – Stock-based compensation expense 38 39 34 27 Non-GAAP products gross profit 23,809 5,410 18,398 17,267 Non-GAAP products gross profit margin 34.2% 15.1% 31.0% 24.6% Global services gross profit (GAAP) 15,945 14,700 19,388 19,600 Plus: Fresh-start accounting adjustments 1,635 1,644 1,943 3,857 SOP 97-2 revenue deferrals (1) 3,345 (98) (763) 641 Depreciation & amortization – Linux Networx 80 21 – – Stock-based compensation expense 52 45 (42) 60 Non-GAAP global services gross profit 21,057 16,312 20,526 24,158 Non-GAAP global services gross profit margin 40.6% 36.1% 41.3% 47.9% Gross profit (GAAP) 29,518 18,594 27,863 27,504 Plus: Fresh-start accounting adjustments 2,831 3,538 5,928 6,597 SOP 97-2 revenue deferrals (1) 12,297 (539) 5,141 7,237 Depreciation & amortization – Linux Networx 130 45 – – Stock-based compensation expense 90 84 (8) 87 Non-GAAP gross profit 44,866 21,722 38,924 41,425 Non-GAAP gross profit margin 36.9% 26.9% 35.7% 34.3% Successor Company Three Months Ended: 29-Jun-07 30-Mar-07 29-Dec-06 (in thousands) Products revenue (GAAP) $74,258 $58,571 $63,682 Plus: Fresh-start accounting adjustments 625 1,137 3,381 SOP 97-2 revenue deferrals (1) 11,718 8,167 8,804 Non-GAAP products revenue 86,601 67,875 75,867 Global services revenue (GAAP) 48,037 52,475 44,041 Plus: Fresh-start accounting adjustments 4,847 7,192 12,496 SOP 97-2 revenue deferrals (1) 2,008 2,225 1,740 Non-GAAP global services revenue 54,892 61,892 58,277 Total revenue (GAAP) 122,295 111,046 107,723 Plus: Fresh-start accounting adjustments 5,472 8,329 15,877 SOP 97-2 revenue deferrals (1) 13,726 10,392 10,544 Non-GAAP total revenue 141,493 129,767 134,144 Products cost of revenue (GAAP) 61,114 41,330 59,918 Plus: Fresh-start accounting adjustments (6,814) (5,329) (12,875) SOP 97-2 revenue deferrals (1) 7,966 2,454 5,318 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense (24) (21) (6) Non-GAAP products cost of revenue 62,242 38,434 52,355 Global services cost of revenue (GAAP) 29,034 33,025 29,387 Plus: Fresh-start accounting adjustments 170 626 326 SOP 97-2 revenue deferrals (1) 247 1,120 975 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense (33) (24) (6) Non-GAAP global services cost of revenue 29,418 34,747 30,682 Cost of revenue (GAAP) 90,148 74,355 89,305 Plus: Fresh-start accounting adjustments (6,644) (4,703) (12,549) SOP 97-2 revenue deferrals (1) 8,213 3,574 6,293 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense (57) (45) (12) Non-GAAP cost of revenue 91,660 73,181 83,037 Products gross profit (GAAP) 13,144 17,241 3,764 Plus: Fresh-start accounting adjustments 7,439 6,466 16,256 SOP 97-2 revenue deferrals (1) 3,752 5,713 3,486 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense 24 21 6 Non-GAAP products gross profit 24,359 29,441 23,512 Non-GAAP products gross profit margin 28.1% 43.4% 31.0% Global services gross profit (GAAP) 19,003 19,450 14,654 Plus: Fresh-start accounting adjustments 4,677 6,566 12,170 SOP 97-2 revenue deferrals (1) 1,761 1,105 765 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense 33 24 6 Non-GAAP global services gross profit 25,474 27,145 27,595 Non-GAAP global services gross profit margin 46.4% 43.9% 47.4% Gross profit (GAAP) 32,147 36,691 18,418 Plus: Fresh-start accounting adjustments 12,116 13,032 28,426 SOP 97-2 revenue deferrals (1) 5,513 6,818 4,251 Depreciation & amortization – Linux Networx – – – Stock-based compensation expense 57 45 12 Non-GAAP gross profit 49,833 56,586 51,107 Non-GAAP gross profit margin 35.2% 43.6% 38.1% Predecessor Company Three Months Ended: 29-Sep-06 30-Jun-06 31-Mar-06 30-Dec-05 30-Sep-05 (in thousands) Products revenue (GAAP) $60,606 $49,003 $46,092 $66,462 $90,538 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 3,308 12,352 2,222 7,488 8,230 Non-GAAP products revenue 63,914 61,355 48,314 73,950 98,768 Global services revenue (GAAP) 61,199 66,705 59,470 70,334 70,201 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 1,846 1,124 (110) 109 708 Non-GAAP global services revenue 63,045 67,829 59,360 70,443 70,909 Total revenue (GAAP) 121,805 115,708 105,562 136,796 160,739 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 5,154 13,476 2,112 7,597 8,938 Non-GAAP total revenue 126,959 129,184 107,674 144,393 169,677 Products cost of revenue (GAAP) 42,710 36,218 35,042 43,517 62,550 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 2,114 4,518 1,180 2,941 4,215 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense – 4 (14) (24) (54) Non-GAAP products cost of revenue 44,824 40,740 36,208 46,434 66,711 Global services cost of revenue (GAAP) 32,265 34,314 33,185 37,435 38,172 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 681 157 154 425 595 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense 7 18 (39) (47) (174) Non-GAAP global services cost of revenue 32,953 34,489 33,300 37,813 38,593 Cost of revenue (GAAP) 74,975 70,532 68,227 80,952 100,722 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 2,795 4,675 1,334 3,366 4,810 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense 7 22 (53) (71) (228) Non-GAAP cost of revenue 77,777 75,229 69,508 84,247 105,304 Products gross profit (GAAP) 17,896 12,785 11,050 22,945 27,988 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 1,194 7,834 1,042 4,547 4,015 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense – (4) 14 24 54 Non-GAAP products gross profit 19,090 20,615 12,106 27,516 32,057 Non-GAAP products gross profit margin 29.9% 33.6% 25.1% 37.2% 32.5% Global services gross profit (GAAP) 28,934 32,391 26,285 32,899 32,029 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 1,165 967 (264) (316) 113 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense (7) (18) 39 47 174 Non-GAAP global services gross profit 30,092 33,340 26,060 32,630 32,316 Non-GAAP global services gross profit margin 47.7% 49.2% 43.9% 46.3% 45.6% Gross profit (GAAP) 46,830 45,176 37,335 55,844 60,017 Plus: Fresh-start accounting adjustments – – – – – SOP 97-2 revenue deferrals (1) 2,359 8,801 778 4,231 4,128 Depreciation & amortization – Linux Networx – – – – – Stock-based compensation expense (7) (22) 53 71 228 Non-GAAP gross profit 49,182 53,955 38,166 60,146 64,373 Non-GAAP gross profit margin 38.7% 41.8% 35.4% 41.7% 37.9% Three Months Ended: FY2008 FY2007 FY2006 (in thousands) Products revenue (GAAP) $171,257 $257,117 $252,095 Plus: Fresh-start accounting adjustments 524 5,143 – SOP 97-2 revenue deferrals (1) 63,256 31,997 30,292 Non-GAAP products revenue 235,037 294,257 282,387 Global services revenue (GAAP) 182,886 205,752 266,710 Plus: Fresh-start accounting adjustments 9,008 24,535 – SOP 97-2 revenue deferrals (1) 5,274 7,819 1,831 Non-GAAP global services revenue 197,168 238,106 268,541 Total revenue (GAAP) 354,143 462,869 518,805 Plus: Fresh-start accounting adjustments 9,532 29,678 – SOP 97-2 revenue deferrals (1) 68,530 39,816 32,123 Non-GAAP total revenue 432,205 532,363 550,928 Products cost of revenue (GAAP) 137,411 205,072 177,327 Plus: Fresh-start accounting adjustments (9,291) (25,018) – SOP 97-2 revenue deferrals (1) 42,245 17,852 12,854 Depreciation & amortization – Linux Networx (74) – – Stock-based compensation expense (138) (51) (88) Non-GAAP products cost of revenue 170,153 197,855 190,093 Global services cost of revenue (GAAP) 113,253 123,711 143,106 Plus: Fresh-start accounting adjustments (71) 1,122 – SOP 97-2 revenue deferrals (1) 2,149 3,023 1,331 Depreciation & amortization – Linux Networx (101) – – Stock-based compensation expense (115) (56) (242) Non-GAAP global services cost of revenue 115,115 127,800 144,195 Cost of revenue (GAAP) 250,664 328,783 320,433 Plus: Fresh-start accounting adjustments (9,362) (23,896) – SOP 97-2 revenue deferrals (1) 44,394 20,875 14,185 Depreciation & amortization – Linux Networx (175) – – Stock-based compensation expense (253) (107) (330) Non-GAAP cost of revenue 285,268 325,655 334,288 Products gross profit (GAAP) 33,846 52,045 74,768 Plus: Fresh-start accounting adjustments 9,815 30,161 – SOP 97-2 revenue deferrals (1) 21,011 14,145 17,438 Depreciation & amortization – Linux Networx 74 – – Stock-based compensation expense 138 51 88 Non-GAAP products gross profit 64,884 96,402 92,294 Non-GAAP products gross profit margin 27.6% 32.8% 32.7% Global services gross profit (GAAP) 69,633 82,041 123,604 Plus: Fresh-start accounting adjustments 9,079 23,413 – SOP 97-2 revenue deferrals (1) 3,125 4,796 500 Depreciation & amortization – Linux Networx 101 – – Stock-based compensation expense 115 56 242 Non-GAAP global services gross profit 82,053 110,306 124,346 Non-GAAP global services gross profit margin 41.6% 46.3% 46.3% Gross profit (GAAP) 103,479 134,086 198,372 Plus: Fresh-start accounting adjustments 18,894 53,574 – SOP 97-2 revenue deferrals (1) 24,136 18,941 17,938 Depreciation & amortization – Linux Networx 175 – – Stock-based compensation expense 253 107 330 Non-GAAP gross profit 146,937 206,708 216,640 Non-GAAP gross profit margin 34.0% 38.8% 39.3%

SOURCE SGI

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