STOCKREPORTS		 Silicon Graphics, Inc. NYSE Symbol SGI
In S&P 500
19-JUL-97 Industry:
Computers (Hardware)		 Summary: This company manufactures workstations, servers and supercomputers that incorporate interactive 3-D graphics, digital media and multiprocessing technologies.

Recent Price 17.75
52 Wk Range 27.50 - 12.88		 Yield Nil
12-Mo. P/E NM

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
5-
Fair Value
29.80
Risk
MEDIUM
Earn/Div Rank
B
Technical Evaluation:
BULLISH since 05/97
Rel. Strength Rank (1 Lowest - 99 Highest)
41
Insider Activity
Neutral

Overview 09-JUN-97

Revenues are expected to advance less than 5% in FY 97 (Jun.) from the combined SGI/Cray level of FY 96, but could grow as much as 20% in FY 98. FY 97's growth reflects flatness in the first half, owing to product transition issues at SGI and a difficult Cray sales comparison in the second quarter. While revenue growth accelerated in the third quarter, growth was lower than expected. Gross margins have narrowed so far this year, reflecting the inclusion of lower-profit Cray products, startup costs related to a new product line, as well as heightened competition in SGI's core workstation business--we expect this competition to increase further. R&D and SG&A expenses are expected to decline gradually as a percentage of revenues, owing to the higher sales. We believe this will lead to operating margins within the range of SGI's target model of 11%-13%. We estimate FY 98 EPS of $1.40.

Valuation 09-JUN-97

We are maintaining our hold opinion on the shares, in light of SGI's inconsistent financial performance over the past several years, offset by good demand trends seen recently for new product lines. The company has disappointed investors in each of the last seven quarters as poorly executed product transitions and pricing pressures disrupted its long record of above-average revenue and EPS growth. Nevertheless, recent order activity for the company's new line of workstation and server products has been encouraging and may suggest that SGI has finally turned the corner. Despite these positive signs, we would still like to see more consistent financial results before we would commit new funds. As a result, current investors are recommended to hold the shares.

Key Stock Statistics

S&P EPS Est. 1997 0.40
P/E on S&P Est. 1997 44.4
S&P EPS Est. 1998 1.40
Dividend Rate/Share Nil
Shs. outstg. (M) 177.0
Avg. daily vol. (M) 1.359
Tang. Bk. Value/Share 9.62
Beta 0.27
Shareholders 5,500
Market cap. (B) $ 3.1
Inst. holdings 62%
Value of $10,000 invested 5 years ago:$ 15,690

Fiscal Year Ending Jun. 30

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 765.6 595.3 448.5 301.6 231.1 184.1
Q2 825.3 671.7 549.6 370.4 270.2 234.9
Q3 909.4 676.9 577.0 376.3 270.7 207.7
Q4 NA 977.4 653.2 433.3 319.3 239.8
Year NA 2,921 2,228 1,482 1,091 866.6

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 -0.13 0.33 0.26 0.17 0.09 -0.25
Q2 -0.07 0.31 0.34 0.24 0.15 0.11
Q3 0.06 0.31 0.38 0.23 0.14 -0.01
Q4 E0.35 -0.30 0.30 0.28 0.22 -0.94
Year E0.40 0.65 1.28 0.91 0.60 -1.09

Dividend Data: No cash dividends have been paid. The shares were split two for one in 1993 and 1992.

Business Summary 09-JUN-97

It was Silicon Graphics computers that created the dinosaurs used to make "Jurassic Park." The Silicon Graphics family of workstation, server and supercomputer systems incorporates interactive three-dimensional graphics, digital media and multiprocessing supercomputing technologies. SGI's computers all use MIPS RISC microprocessors, as opposed to Intel Corp.'s CISC microprocessors, developed by its MIPS Technologies subsidiary, acquired in 1992.

The company is undergoing a significant product transition. In October 1996, SGI announced the new O2, Origin and Onyx2 product families and, in January 1997, announced the Octane line of workstations, replacing a substantial portion of its current product line. SGI's servers and high-performance computing systems (primarily the Origin, POWER CHALLENGE, CHALLENGE, Onyx and Cray families) comprise the majority of its revenues (some 60% of the total.) Servers are general-purpose computers with the same computational performance as workstations, but without the graphics capabilities. SGI's supercomputing servers, which were introduced in 1994, are meant to replace or augment aging mainframe computers.

Workstations comprise some 40% of revenues (including O2, Indy and Indigo2 families). Competition in the workstations market has increased significantly in recent years. Not only has SGI seen competition in the traditional UNIX workstation rivals, but also personal computers (PCs) have emerged as a competitor due to the advances in Intel's Pentium processor, combined with Microsoft's Windows NT operating system. Workstations are used primarily by technical, scientific and creative professionals to simulate, analyze, develop and display complex 3-D objects and phenomena. While SGI has benefited from its niche position in graphics, PCs are getting better at doing graphics, helped by graphics accelerator chips that are significantly enhancing the PC's ability to display 3-D.

In July 1996, SGI acquired Cray Research, the world's leading provider of advanced computers, for $576 million cash and the issuance of seven million of its common shares. Cray's business model introduced a new dynamic to SGI--Cray's product lines have much longer sales cycles than those of SGI. Recently (May 1997), SGI announced a reorganization to consolidate all computer products and manufacturing operations into a single computer systems unit.

SGI also has a software division, Alias/Wavefront, that supplies modeling and animation applications used by creative professionals in the entertainment, industrial design and visualization and graphic design markets.

International sales accounted for more than half (53%) of SGI's FY 96 revenues.

Capitalization

Long Term Debt: $398,335,000 (3/97).
Conv. Pfd. Stock: $16,998,000; held by NKK Corp.

Per Share Data ($)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Tangible Bk. Val. 9.62 8.28 6.37 4.56 3.60 3.97 3.02 2.43 2.23 1.07
Cash Flow 1.78 1.89 1.45 0.98 -0.54 0.68 0.68 0.39 0.33 0.19
Earnings 0.65 1.28 0.91 0.60 -1.10 0.36 0.43 0.17 0.22 0.11
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Prices - High 30 3/8 45 5/8 33 1/8 24 3/4 14 7/8 12 1/4 10 1/4 7 3/8 6 1/4 7 1/8
- Low 17 7/8 26 7/8 18 3/4 11 3/4 7 1/8 5 5/8 4 1/2 3 5/8 3 3/8 2 3/4
P/E Ratio - High 47 36 36 41 NM 33 24 44 29 63
- Low 28 21 21 20 NM 15 11 21 16 24

Income Statement Analysis (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Revs. 2,921 2,228 1,482 1,091 867 550 420 264 153 86.0
Oper. Inc. 475 436 277 180 88.2 74.8 69.3 29.7 22.2 13.7
Depr. 198 107 84.2 54.8 63.4 31.3 22.3 15.1 6.7 3.5
Int. Exp. 22.4 18.2 8.3 2.9 2.8 3.2 5.6 2.3 2.2 0.7
Pretax Inc. 185 317 198 125 -102 48.0 48.0 16.0 17.0 11.0
Eff. Tax Rate 40% 29% 29% 30% NM 31% 33% 30% 29% 50%
Net Inc. 115 225 141 88.0 -117 33.0 32.0 11.0 12.0 6.0

Balance Sheet & Other Fin. Data (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Cash 295 516 401 155 183 196 86.0 94.0 76.0 58.0
Curr. Assets 2,096 1,509 1,024 676 578 480 298 238 170 94.0
Total Assets 3,158 2,207 1,519 946 758 642 364 291 207 107
Curr. Liab. 1,101 573 356 268 217 116 83.0 46.0 32.0 20.0
LT Debt 381 287 230 26.0 27.3 27.8 36.4 87.8 35.1 35.6
Common Eqty. 1,658 1,329 887 600 446 329 210 157 140 52.0
Total Cap. 2,057 1,633 1,151 660 507 523 281 245 175 87.0
Cap. Exp. 189 148 89.4 83.6 67.0 47.2 29.6 23.3 21.1 9.9
Cash Flow 312 332 224 142 -60.3 62.5 54.3 26.6 19.0 9.1

Curr. Ratio 1.9 2.6 2.8 2.5 2.7 4.1 3.6 5.1 5.3 4.7
% LT Debt of Cap. 18.5 17.5 20.0 3.9 5.4 5.3 13.0 35.9 20.1 40.8
% Net Inc.of Revs. 3.9 10.0 9.5 8.0 NM 6.0 7.7 4.4 8.0 6.5
% Ret. on Assets 4.3 11.9 11.1 10.0 NM 6.1 9.5 4.6 7.1 4.9
% Ret. on Equity 7.7 20.1 18.3 16.3 NM 10.8 16.9 7.6 11.8 15.7

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--2011 N. Shoreline Blvd., Mountain View, CA 94039-7311. Tel--(415) 960-1980. Website--http://www.sgi.com Chrmn, Pres & CEO--E. R. McCracken. Secy--W. L. Kelly. Investor Contact--Marilyn Lattin. Dirs--R. R. Bishop, A. F. Jacobson, C. R. Kramlich, R. A. Lutz, E. R. McCracken, J. A. McDivitt, L. Shapiro, R. B. Shapiro, J. G. Treybig. Transfer Agent & Registrar--Boston EquiServe, LP. Incorporated--in California in 1981; reincorporated in Delaware in 1990. Empl-- 10,485. S&P Analyst: Megan Graham Hackett


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