Silicon Graphics, the struggling maker of high-end computers, filed for Chapter 11 bankruptcy protection on Monday as part of a deal with its creditors.
Its shares fell more than 80 per cent to just under 6 cents on the news in midday trading in New York.
SGI said it had reached an agreement with all of its Senior Secured bank lenders and with holders of a significant amount of its Senior Secured debt on the terms of a reorganisation plan that would reduce its debt by around $250m.
But as part of this and as the next step of its plan to reorganise its businesses, its US operations had filed Chapter 11 petitions. Its businesses in Europe, Canada, Mexico, South America and Asia Pacific will continue to operate normally, without the supervision of the US courts.
Silicon Graphics said it expected to file its reorganisation plan shortly and emerge from Chapter 11 within six months.
The maker of supercomputers and high-end graphics workstations that create special effects in movies has struggled in recent years to differentiate itself as high-performance work has become possible on much cheaper computers.
SGI brought in Dennis McKenna as chairman and chief executive in January to try to turn the Silicon Valley company around.
“This is a necessary and responsible step that will strengthen the company and foster a sustained turnaround at SGI,” he said yesterday.
It was business as usual for its customers, he added, and SGI was planning to unveil an expansive product portfolio. Mr McKenna said the Chapter 11 proceedings would lead to a significantly improved balance sheet.
SGI also announced third quarter results on Monday that showed revenues had fallen almost a third compared to a year earlier, from $159m to $108m. The loss for the three months ending March 31 was $43m or 16 cents a share, similar to the $45m, 17 cents a share loss a year ago.