Ex-Hollywood high-flyer files for bankruptcy protection

Silicon Graphics (SGI) announced on Monday that it has filed for Chapter 11 bankruptcy protection as it seeks to reorganise and re-emerge from its financial woes.

SGI, a former high-flying server and workstation maker for Hollywood and the graphics industry, said it reached a voluntary agreement with its debt holders to simplify its capital arrangements and cut its debt by about $250m under the reorganisation plan.

The company, which made its filing in the US Bankruptcy Court for the Southern District of New York, said it plans to turn in a reorganisation plan to the court soon and to emerge from Chapter 11 within six months.

Dennis McKenna, chief executive, said in a statement: "This is a necessary and responsible step that will strengthen the company and foster a sustained turnaround at SGI."

SGI already has a history of turnaround attempts.

Its latest was initiated in March, when it cut 12 per cent of its work force and hired a new chief financial officer and chief operating officer. The moves were part of a plan from McKenna, who was hired as CEO earlier in the year. McKenna said he wanted to expand into new customer markets, such as telecommunications, that have high computing needs.

And under SGI's previous CEO, Bob Bishop, the company launched a restructuring effort in 2000 to shift its focus away from selling supercomputers, multimedia software and embedded chips for consumer devices to one that focused on much smaller markets, such as digital content creation and supercomputing for technical and scientific projects. SGI's technology, for example, played a role in creating content for such movies as Lord of the Rings.

Before Bishop's arrival in 1999, then-CEO Rick Belluzzo also initiated a turnaround effort at SGI that included cutting 1,500 positions and selling off its Cray supercomputer unit.

Despite these and other efforts since the early 1990s, the company has continued to encounter losses and lose favour with investors. Late last year, SGI's stock was delisted after falling below New York Stock Exchange requirements.

Dawn Kawamoto writes for CNET News.com