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by Brenon Daly

Rackable Systems (RACK) has won approval from the bankruptcy courts to acquire Silicon Graphics Inc for $42.5m in cash, as other potential bidders passed on the one-time tech stalwart. And, just as Tera Computer did when it bought the much-better-known Cray (NASDAQ:CRAY) in 2000, Rackable has opted to take on the Silicon Graphics name and branding. Rackable Systems becomes Silicon Graphics International, and the brand will be SGI. The Rackable name will survive only as a product moniker.

The higher price – the original offer was just $25m – now includes the equity of SGI’s international subsidiaries and federal systems businesses. The combined companies will have 5,000 customers and 1,350 employees worldwide, though the headcount is expected to shrink fairly rapidly to 1,250. The headquarters will stay in Rackable’s hometown of Fremont, California. Rackable’s current president and CEO Mark Barrenechea will hold the same roles and the board of directors will remain unchanged. However, some SGI executives will join the new management team, including Diane Gibson (senior VP of operations), Eng Lim Goh (senior VP and chief technical officer) and Robert Pette (VP of visualization).

Target customers are medium- and large-scale datacenters and high-performance computing (HPC) firms with Rackable’s x86 cluster compute systems, shared memory clusters, modular systems, storage products, data management software, HPC tools and visualization software. However, Rackable will have to work hard in the current economic climate. While sales were up slightly from the previous quarter, the company’s just-released first-quarter figures showed a year-over-year revenue decline of 34.5% to $44.3m and a loss of $13.4m.

Source: Silicon Graphics Name Returns via Rackable's Acquisition