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Silicon Graphics International Corp All About Big Data

Jan. 10, 2014 6:56 AM ETSGI
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As the world around us increasingly becomes more digitized, so will demand grow for data processing, transfer and storage solutions that are able to handle the huge chunk of information that we are generating by the minute. This trend has seen the rise of the "big data concept" over the last half decade. Tech scientists are constantly researching new mechanisms to expand the capacity of data current that database systems can handle. Generally this is a frontier market that enterprises are yet to fully understand and leverage to the maximum. Silicon Graphics International Corp (NASDAQ: SGI) is an emerging company that has the potential to be the dominant player in this niche market segment.

New Contracts

Founded in 2002, Silicon Graphics International Corp markets its products to research institutions, government bodies and corporates through a direct sales force and resellers. Over the last couple of months, the company has announced a number of new deals that are likely to give some optimism to investors. In a press release on November 20th 2013, the company announced that it was doing a project for the United Kingdom's Atomic Weapons Establishment, with focus on upgrading the technological capabilities of the Trident nuclear deterrence program. Although the size of the contract was not announced, it seems to be a sizable, long-term project. During the same week, the company also announced that it had received an order from the Institute of Statistical Mathematics for assimilation of a custom super computer. Besides these new deals, SGI has also been getting positive press coverage. CEO Jorge Luis Titinge was nominated recently for a prestigious Hispanic business award. Deloitte featured Silicon Graphics International Corp as one of the fastest growing companies in North America in a ranking of the 500 fastest growing enterprises in the media and technology sectors.

Top line Impresses

The company has seen good sales growth over the last two years under review, averaging 10 percent each year. Gross margins remain thin, although the company seems intent on making efforts to reduce its direct costs. On an annual basis, the company continues posting losses although these have greatly narrowed. As of 2013 (using results from second half as baseline), net income stands at minus $2.8 million, a big improvement from $24.4 million recorded during the same period last year. However, the company does record positive earnings during certain periods within the year. Having managed to defer some long-term debt, the company's balance sheet and overall fundamentals look quite healthy.

Shares Recovering

Despite the amount of positive press coverage and optimism surrounding this stock, it is still vulnerable to short-term market upsets. After having almost doubled in price this year, the company's shares retreated after poorer than expected earnings for the third quarter. However, it is important to stay focused on the long-term rewards. As the company inches closer towards to profitability, expect its share to double or even triple. This is a stock that you would want to consider adding to your portfolio or at least including on your watch list.

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