Rackable Systems, a provider of servers and storage products for medium to large-scale data centers, has announced its agreement to acquire substantially all the assets of Silicon Graphics, which has been struggling for years, for approximately $25 million in cash, subject to adjustment in certain circumstances, plus the assumption of certain liabilities associated with the acquired assets.

“The combined company will be positioned to solve the most demanding business and technology challenges our customers confront today. In addition, this combination gives us the potential for significant operational synergies, a strong balance sheet, and positions the combined company for long-term growth and profitability,” said Mark J. Barrenechea, president and chief exec of Rackable Systems.

The combined businesses will provide customers with hardware and software technology within large-scale x86 cluster computing, HPC, Internet, Cloud Computing, large-scale data storage environments and visualization platforms across many verticals and geographies. This combination is also expected to result in a stronger global services organization; reaching commercial, government and scientific sectors on a worldwide basis.

“We have been working very hard to strengthen our company, and today, we've taken another big step in that direction. This transaction represents a compelling opportunity for Silicon Graphics' customers, partners and employees, who can all benefit from the emerging stronger company with better technologies, products and markets reach,” said Robert Ewald, chief exec of Silicon Graphics.

Rackable has signed an Asset Purchase Agreement to acquire substantially all the assets of SGI, and to assume certain liabilities relating to the assets, pursuant to Chapter 11 of the U.S. Bankruptcy Code, under which SGI filed its petition in New York on April 1, 2009. Completion of the transaction is subject to a number of closing conditions, including the approval of the Bankruptcy Court, and other uncertainties. Subject to such conditions and uncertainties, the transaction is expected to close within approximately 60 days. It is expected that SGI's business operations will continue during the pre-closing period. SGI's international operations would be part of the sale, but would not be part of the bankruptcy process.

Rackable also announced today that it had suspended its previously announced program including the repurchase of up to $40 million of the company’s stock.

Tags: Silicon Graphics, Rackable