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SGI suffering more Layoffs (Updated)

by on February 23, 2011

An SEC filing from today has announced what may be the next dark chapter in the legacy of SGI: Layoffs expected to run the company $6.6million in severance packages.

On February 22, 2011, Silicon Graphics International Corp. (the “Company”) began providing notices to employees whose employment will be terminated as part of a worldwide workforce reduction. The Company implemented a restructuring to streamline operations and reduce operating expenses. The workforce reduction was approved by the Company’s Board of Directors on February 18, 2011.

In connection with the worldwide workforce reduction, the Company expects to incur pre-tax cash charges of up to $6.6 million for severance pay expenses and related cash expenditures. The Company expects to recognize the majority of the severance charges in the third and fourth quarter of fiscal 2011, with the remaining costs to be recognized in the first quarter of fiscal 2012.

They claim it’s just to trim the fat and make them more efficient, but let’s look at some numbers.

If you assume a fully burdened cost of an employee to be roughly $150k (that includes benefits, salary, everything), then a 90-day severance could be somewhere in the neighborhood of $50 ($150k / 4 = $37.5k, then add a bit for padding and insurance).  At $6.6Million, that’s over 130 employees.

Looking back at their final quarterly filing for 2010, you can get some rough numbers on their employees (Search for ‘headcount’):

  • Manufacturing: 581 people
  • R&D: 278
  • Sales & Marketing: 247
  • Administrative: 193
  • Total: Around 1300

That means they just axed 10% of the company.  That’s more than a little trimming, that’s pretty substantial reorganization.

I’ve heard a lot of skepticism over SGI’s recent amazing quarterly report, given the displeasure I’ve heard from several individuals over the results of the UltraViolet product line.  I’m starting to think that, even with the great PR they got from that report, it was largely smoke and mirrors over the change in accounting and rushing a few major sales just under the wire at the end of the year.  I’ll be surprised if they can do it again this year.

Update 12/24 1pm: The Register got their hands on an internal memo about this, they claims only 55 employees were laid off in the reduction, totalling about 4%.

“Our actions today reflect a variety of considerations for performance and efficiency within the context of achieving our overall FY11 financial goals,” Barrenechea explained in his email to employees. “Any reduction in force, no matter the number of positions impacted, is difficult. We achieved a strong first half to our fiscal year and we need to be prudent with our costs in the second half. Today’s announcement does not change our outlook for growth and profitability, but rather, reinforces our commitment to achieving these goals with streamlined operations and optimized operating expenses.”

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