Rackable Grabs Silicon Graphics for $25M

The company listed assets of $390.5 million and total debt of $526.5 million in its latest Chapter 11 filing, according to Reuters, but sought to reassure its customers in a statement released Wednesday.

"We have been working very hard to strengthen our company, and today, we've taken another big step in that direction," said Robert Ewald, the Silicon Graphics CEO. "This transaction represents a compelling opportunity for Silicon Graphics' customers, partners and employees."

Rackable's CEO Mark Barrenechea, sent out a similar message.

"Together, we believe we will be a much stronger entity with great products and people offering a compelling proposition to compete more effectively in, and across, our collective markets," he said. "This combination gives us the potential for significant operational synergies, a strong balance sheet, and positions the company for long-term growth and profitability."

Even with Silicon Graphics' extensive debt, Pund-IT's King thinks that the deal is still a good one for Rackable.

"The deal is not without risk but some of SGI's focus areas [such as] lower end high performance and supercomputing, for example, mesh well with Rackable's offerings and could become highly profitable in the years ahead," he explained.

Rackable's purchase of Silicon Graphics is subject to a number of closing conditions, including the approval of the Bankruptcy Court. The transaction is nonetheless expected to close within approximately 60 days.

Despite a broader rally in tech stocks that saw the Nasdaq rise 1.51%, investors responded negatively to Rackable's move, and its stock slipped 18 cents, or 4.43%, to close at $3.88.