SGI asset sale puts Pentagon on guard over $40M systems order

In January, Silicon Graphics Inc. was in a downward spiral that eventually led to an April 1 deal to sell its assets to Rackable Systems Inc. for just $25 million. But that didn't stop the U.S. Department of Defense from signing a $40 million systems contract with SGI.

Cray Henry, head of the DOD's High-Performance Computing Modernization Program, said this month that SGI's "financial situation was not as strong as we would have liked" in January. But, he added, the Pentagon went ahead with the multiyear contract that month for six systems because it believed that the company was still "financially responsive."

Now the DOD is watching the situation closely. Henry said he expects "significant uncertainty" until the end of May, which is when Rackable expects to complete the asset purchase. But both companies "tell us they are committed to maintaining the systems we purchased in prior years and delivering the systems we ordered for delivery this year," he said.

The first of the Xeon-based Altix systems that the Pentagon ordered from SGI is scheduled to be delivered this month. The machines will be installed at five research-and-development facilities in the U.S., said SGI.

Henry isn't the only SGI user who's keeping an eye on the high-performance computing vendor. Gabe Turner, a systems administrator in the HPC group at the Minnesota Supercomputing Institute in Minneapolis, said that his biggest concern is the future of SGI's customer support.

"We've got support contracts that are just over a year old, and what is the state of SGI going to be two years from now?" Henry said. "I just have no idea."

This version of the story originally appeared in Computerworld's print edition.

Copyright © 2009 IDG Communications, Inc.

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