Why Silicon Graphics International Corp. Shares Soared Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Silicon Graphics International Corp. (NASDAQ: SGI  ) jumped as much as 14% Friday after the company announced the UK Atomic Weapons Establishment (AWE) has concluded compete acceptance of three of SGI's ICE X supercomputing systems.

So what: AWE, for its part, manufactures and maintains warheads for the UK's nuclear deterrent, Trident. This encompasses the entire life cycle of nuclear warheads, from the initial concept design all the way through to assembly, support, decommissioning and, finally, disposal. Silicon Graphics International's ICE X supercomputing systems, in turn, serve to help AWE handle advanced research and development tasks related to its efforts to "continually develop methods to verify the safety and reliability of nuclear warheads through a science-based program."

Now what: Paul Tomlinson, who serves as AWE's head of high performance computing, stated, "From the very outset there was a one-team approach between SGI and AWE. We are very happy with the professionalism and adaptability of SGI to meet and exceed our expectations throughout this complex project."

Keep in mind the exact financial terms of this agreement weren't disclosed in today's press release. But this is a big win for Silicon Graphics International, which is currently unprofitable on a trailing 12-month basis and trading at a lofty 103 times next year's estimated earnings. All things considered, and assuming this helps push SGI further toward its goals of sustained profitability, I think the market is right to bid up shares of Silicon Graphics today.

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