NEC buys part of SGI JapanMountain View 25 October 2001 SGI has reached definitive agreement with NEC Corporation to create a strategic alliance that is expected to strengthen SGI's presence in the Japanese market. Under the alliance NEC, will acquire from SGI an interest in SGI Japan, Ltd., the subsidiary that supplies SGI equipment, services and solutions in Japan. SGI Japan will be converted from a wholly-owned SGI subsidiary to a company jointly owned by SGI, NEC and NEC's publicly-held affiliate, NEC Soft, Ltd. The name of the business will remain SGI Japan.
NEC will purchase a 40% interest and NEC Soft will purchase a 20% interest in SGI Japan from SGI for aggregate consideration of approximately $96 million, before settlement of intercompany amounts.
As part of the alliance SGI and SGI Japan have entered into a long-term exclusive distribution arrangement for SGI products in Japan, and as such SGI Japan will obtain SGI trademark and intellectual property rights related to the business operations in Japan in accordance with standard business practice.
SGI's yen denominated debt, which was incurred through SGI Japan and would otherwise have matured in December 2001, will also be restructured to mature in quarterly installments beginning in calendar 2002 and ending in March 2004.
The transaction is expected to close in the current quarter. Following the transaction SGI will no longer consolidate SGI Japan in its financial statements but will instead record its sales to SGI Japan and its proportionate share of SGI Japan's earnings. SGI plans to provide updated financial guidance reflecting the impact of the transaction on its quarterly financials when the deal closes. However, SGI's objective of breaking even at the operating profit level in this quarter as discussed in its quarterly earnings conference call on Monday, October 22, 2001, remains unchanged.
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