MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH (68581)
PATRICK J. COUGHLIN (111070)
TRAVIS E. DOWNS, III (148274)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
     - and -
LISA C. ATKINSON (163320)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
BARRACK, RODOS & BACINE
STEPHEN R. BASSER (121590)
600 West Broadway, Suite 1700
San Diego, CA 92101
Telephone: 619/230-0800

WOLF POPPER LLP
STEPHEN D. OESTREICH
PATRICIA I. AVERY
ROBERT C. FINKEL
845 Third Avenue
New York, NY 10022
Telephone: 212/759-4600

Plaintiffs' [Proposed] Co-Lead Counsel
[Additional counsel appear on signature page.]

I. INTRODUCTION

II. SUMMARY OF ACTIONS

III. THIS COURT SHOULD CONSOLIDATE THE FIVE RELATED SGI LAWSUITS FOR PURPOSES OF EFFICIENCY

IV. THIS COURT SHOULD RESOLVE THE CONSOLIDATION ISSUE AS A PREREQUISITE TO THE DETERMINATION OF LEAD PLAINTIFF

V. CONCLUSION

TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:

PLEASE TAKE NOTICE that on March 20, 1998 at 9:30 a.m., or as soon thereafter as the matter may be heard, in the courtroom of the Honorable Charles A. Legge, United States District Court, Northern District of California, located at 450 Golden Gate Avenue, San Francisco, California, plaintiffs Raymond Allard, Richard Buck, David Chiu, James Letner, Jayant Ishwar, Lief Erickson, Thomas J. Luechtefeld and Preston H. Britt, will, and hereby do move the Court for an order consolidating cases for all purposes under Rule 42 of the Federal Rules of Civil Procedure (the "Motion").

The Motion is brought pursuant to Rule 42 of the Federal Rules of Civil Procedure on the grounds that the five related actions set forth in the Motion involve common questions of law and fact and should be consolidated for the purposes of efficiency. The Motion is based on this Notice of Motion and Motion, the accompanying Memorandum of Points and Authorities in Support of the Motion, the pleadings and other files herein, and such other written or oral argument as may be permitted by the Court.

I. INTRODUCTION

Presently pending in this district are five related securities class actions filed against Silicon Graphics, Inc. ("SGI" or the "Company") and certain of its officers and directors:

Plaintiffs move the Court to consolidate for all purposes the above-referenced actions pursuant to Rule 42 of the Federal Rules of Civil Procedure because each action asserts substantially the same claims and raises substantially the same questions of fact and law.

II. SUMMARY OF ACTIONS

Each of these five related securities class actions allege that defendants made false and misleading statements about SGI's business and financial results in order to artificially inflate the price of SGI stock and/or other securities to facilitate the exchange of a new SGI convertible security for $200 million of outstanding zero coupon debentures, while the defendants sold 286,584 shares of their SGI stock, for more than $7.4 million in unlawful insider-trading proceeds. ¶¶1-6.⁽¹⁾ The complaints describe with particularity a scheme and common course of conduct carried out by defendants, set forth briefly as follows:

In April 1997, when SGI reported very disappointing results for its third quarter of fiscal year 1997, ended March 31, 1997⁽²⁾ -- the seventh consecutive below-expectation quarterly performance for SGI -- SGI's stock collapsed by 28% to just $12-5/8 per share. Analysts and SGI investors were furious over this situation and SGI's top management came under severe criticism. Due to SGI's poor performance over the prior seven quarters, no SGI executive had received any bonus payments under SGI's management incentive plan and the collapse of SGI's stock greatly reduced the value of their SGI stock options and holdings. SGI also faced an extremely threatening financial situation because $200 million principal amount of its outstanding zero coupon debentures had a "put" provision that would force SGI to repurchase those zero coupon debentures for $245 million in November 1998, if SGI's stock was not then selling at $33 per share. Honoring the "poison" put would plunge SGI into a cash crisis if it paid the $245 million in cash, or permanently dilute its earning power if it paid the $245 million in stock. Defendants also knew that Business Week was planning a searing exposé of SGI and its CEO, Edward McCracken, which would push SGI's stock price even lower. ¶¶8-11.

To overcome this desperate situation, during the fourth quarter of fiscal 1997, defendants inflated SGI's revenues, net income and EPS by inducing certain customers to accept millions of dollars of early shipments of computer workstations and servers, offering these customers huge price discounts, extended payment terms and the right to return product they could not resell to enable SGI to pull in revenue. As a result, SGI reported strong fourth quarter fiscal 1997 results well in excess of Wall Street analysts' expectations. ¶¶12-13, 60.

On July 24, 1997, the day before the Business Week exposé hit the streets, SGI announced in a press release its extraordinarily good fourth quarter 1997 results, with revenues and earnings per share ("EPS") far in excess of analysts' expectations. Without disclosing that SGI's fourth quarter sales cannibalized first quarter 1998 revenues, defendants falsely attributed SGI's spectacular results to "strong demand" for its server products, its successful product transition and its management team's excellent "execution." In addition, defendants falsely represented that strong demand for SGI's products had continued during the first quarter of fiscal year 1998, and that SGI would report revenues of $900-$950 million and EPS of $.20-$.21 for the first quarter of fiscal year 1998. ¶¶14, 30.

SGI's spectacular fourth quarter results allowed SGI's top executives to pocket hundreds of thousands of dollars in incentive bonuses. The force of the negative Business Week exposé was so blunted that SGI's stock soared by almost 50% on July 25, 1997, to $27 per share, later advancing to its Class Period high of $30-5/16. ¶¶15-16.

Riding SGI's stock price gains following the release of SGI's surprisingly strong fourth quarter results, SGI quickly closed an offer to exchange the $200 million in outstanding zero coupon debentures for a new SGI convertible security, without the put feature, thus avoiding the risk that exercise of the "poison" put in November 1998 would gravely injure SGI's financial condition. ¶¶20, 79. While unwitting investors were exchanging or buying SGI's artificially inflated securities, defendants took this opportunity to sell 286,584 shares of their personal holdings, pocketing over $7.4 million in illegal insider-trading proceeds. ¶¶21, 90-92.

Ultimately, SGI could not perpetuate its misrepresentations. On October 6, 1997, SGI suddenly revealed that instead of the $900-$950 million in revenue and $.20-$.21 in EPS for its first quarter of fiscal year 1998, ended September 30, 1997, that defendants had previously misled investors to expect, SGI would suffer a huge loss of about $36 million. Defendants explained that SGI's strong fourth quarter fiscal year 1997 results had been the result of pulling in orders from future quarters and that the first quarter of 1998 would suffer a huge revenue shortfall as would later quarters. ¶¶6, 23, 82. On these revelations, SGI stock lost 36% of its value. On December 2, 1997, plaintiffs commenced the first of these five related securities class actions for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 to recoup their losses.

III. THIS COURT SHOULD CONSOLIDATE THE FIVE RELATED SGI LAWSUITS FOR PURPOSES OF EFFICIENCY

Rule 42(a) of the Federal Rules of Civil Procedure allows this Court to order consolidation of separate actions:

When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated; and it may take such orders concerning proceedings therein as may tend to avoid unnecessary cost or delay.

Consolidation pursuant to Rule 42(a) of the Federal Rules of Civil Procedure is proper when actions involve common questions of law and fact. In re Equity Funding Corp. of Am. Sec. Litig., 416 F. Supp. 161, 175 (C.D. Cal. 1976). The district court has broad discretion under this rule to consolidate cases pending within its district. Investors Research Co. v. United States Dist. Court for Cent. Dist., 877 F.2d 777 (9th Cir. 1989).

The five actions pending before this Court present substantially the same factual and legal issues, and involve substantially the same defendants. All five actions are based on the same facts and involve similar subject matter. They also involve similar issues related to class certification, and will likely involve identical discovery. Accordingly, these actions should be consolidated, for so doing would simplify and expedite these proceedings.

Courts have recognized that class action shareholder suits are ideally suited to consolidation pursuant to Rule 42 of the Federal Rules of Civil Procedure, because their unification expedites pre-trial proceedings, reduces case duplication, avoids the harassment of parties and witnesses from inquiries in multiple proceedings and minimizes the expenditure of time and money by all persons concerned. Equity Funding, 416 F. Supp. at 176 (citing Garber v. Randell, 477 F.2d 711, 714 (2d Cir. 1973)).

Moreover, consolidating multi-shareholder class action suits streamlines and simplifies pretrial and discovery motions, class action issues, clerical and administrative management duties and generally reduces the confusion and delay that would result from prosecuting related cases of this nature separately before two or more judges. Id.

IV. THIS COURT SHOULD RESOLVE THE CONSOLIDATION ISSUE AS A PREREQUISITE TO THE DETERMINATION OF LEAD PLAINTIFF

On December 22, 1995, Congress enacted the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which, among other things, provides for consolidation of actions. The PSLRA provides:

If more than one action on behalf of a class asserting substantially the same claim or claims arising under this chapter has been filed, and any party has sought to consolidate those actions for pretrial purposes or for trial, the court shall not make the determination [of appointment of lead plaintiff under §21D(a)(3)(B)(i)] until after the decision on the motion to consolidate is rendered.

15 U.S.C. §78u-4(a)(3)(B)(ii).

The PSLRA sets up a two-stage process where more than one action on behalf of a class asserting substantially the same claims has been filed. First, the Court should decide the consolidation issue. Second, the Court should then decide the lead plaintiff issue "[a]s soon as practicable" after the consolidation motion has been decided. Id.

Plaintiffs urge the Court to resolve the consolidation motion as soon as practicable. A prompt determination is reasonable and warranted under Federal Rules of Civil Procedure 42(a), given the common questions of fact and law presented by the five related actions now pending in this district.

V. CONCLUSION

For the above reasons, and in order to promote judicial economy, plaintiffs respectfully request that the Court consolidate the above-referenced five related actions.

SIL-GRA3\ddh06184.brf

1. All "¶_" and "¶¶__" references are to the Complaint in Reiser, et al. v. Silicon Graphics, Inc., et al, Case No. C-97-4362-CAL, filed on December 2, 1997.

2. SGI's fiscal year begins on July 1st and ends on June 30th.

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on January 29, 1998, declarant served the THE ALLARD GROUP'S NOTICE OF MOTION AND MOTION TO CONSOLIDATE CASES FOR ALL PURPOSES by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 29th day of January, 1998, at San Diego, California.