802301--9/22/2008--SILICON_GRAPHICS

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{stock, price, operating}

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{operation, international, foreign}

{acquisition, growth, future}

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We expect demands on our working capital due to our increased bookings volume, in particular for large sales transactions. We may not be able to raise additional capital in the future on commercially attractive terms or at all, which would restrict our growth and impair our ability to operate. We have a history of losses, and we may not become profitable on a quarterly or annual basis. The failure to attain profitability on a sustained basis would harm our business and the value of our common stock. If our stock continues to have extremely low trading volume or our stock price continues to be volatile, stockholders may only be able to resell our shares at a loss or at a price below the most recently-quoted share price. We expect our operating results to continue to fluctuate significantly. These fluctuations will make our operating results difficult to predict and could cause them to fall below expectations, resulting in declines in our stock price. Our success depends on growth in bookings for sales of our clustered computing and storage products. We may be unable to maintain our overall gross margin. A failure to maintain our overall gross margin would negatively affect our financial performance and stock price. We rely on a limited number of suppliers, and in some cases single-source suppliers, and any disruption or termination of these supply arrangements could delay shipments of our products and could materially and adversely affect our revenue and relationships with current and prospective end users. Sales to or funded by the United States government, which account for a substantial portion of our revenue, are subject to disruptions and delays. Our business would be adversely affected by any production delay, discontinuance or decreased competitiveness of the processors we use. We maintain relatively low inventory and acquire components only as needed; as a result, if shortages of these components arise, we may not be able to secure enough components to build new products to meet customer demand. We may fail to comply with our debt covenants, and this noncompliance could place us in default and lead to termination of our facility and acceleration of our indebtedness. A limited number of stockholders own a large percentage of our shares and are the majority lenders under our financing facility, giving them significant influence over certain corporate matters and interests that may diverge from the interests of other stockholders. If we fail to manage the introduction of new products or enhancements effectively, we may fail to increase, or may lose, market share. We are subject to the risks of international operations. We face intense competition and expect competition to increase in the future, which could hinder the growth of or reduce our revenue or customer base. If we are unable to develop new hardware and software products upgrades and enhancements and to respond to technological changes, we may fail to increase, or we may lose, market share. If we fail to manage future expansion in current and new markets effectively, our business would be harmed. A number of our executive officers have only recently been hired and they have limited experience with our business and with working with our management. If we lose key personnel or if we are unable to attract and retain highly-qualified personnel on a cost-effective basis, it would be more difficult for us to manage and grow our business. Our international sales may require export licenses and expose us to additional risks. If we do not maintain strong financial controls, investor confidence in us may decline and our stock price may decline as a result. Our products may contain component, manufacturing or design defects or may not meet our customers performance criteria, which could cause us to incur significant installation or repair expenses, harm our customer relationships and industry reputation, reduce our revenue and make achieving profitability more difficult. If we fail to offer high-quality customer support, our business would suffer. We may become involved in intellectual property disputes, which could be expensive, distract our management team and result in reduced ability to use technologies that are important to our business. Our use of open source and third-party software could impose unanticipated conditions or restrictions on our ability to commercialize our products. We may incur substantial costs in order to comply with laws and regulations governing the environment, which could harm our operating results. Shares eligible for sale in the future could negatively affect our stock price. Our bankruptcy reorganization may negatively impact our future operations and the operations of our subsidiaries. We do not intend to pay cash dividends on our common stock. Stockholders will realize a return on their investment only if our stock price appreciates and they sell. Delaware law and our amended and restated certificate of incorporation and bylaws contain provisions that could delay or discourage takeover attempts that stockholders may consider favorable and result in a lower market price for our common stock.

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802301--9/22/2008--SILICON_GRAPHICS_INC