SGI: Moving Beyond Dinosaur Era
Silicon Graphics hyped a new "strategic direction"
at a New York press conference on Tuesday that
was designed to give Wall Street and the media the
message that the troubled maker of high-end
workstations has a hip new turnaround plan.
Did someone say hip replacement? Bo knows.
But the words of new chairman and CEO Rick
Belluzzo -- "we must aggressively focus on the
markets where our unique strengths in visual
computing and high-bandwidth systems add
value" -- didnt ring with the excitement of new
news. The visual-computing market has long been
the staple of Silicon Graphicss business.
Fighting over the DECk chairs on the Titanic. And losing.
What was new was the company's decision to spin
off its multimedia chip-design subsidiary, MIPS
Technologies Inc., and use Intel chips in Silicon
Graphics workstations. Long famous for creating
the dinosaurs in Jurassic Park, and other cool film
special effects, the workstations will soon run both
Silicon Graphicss Unix-based operating system
and Microsofts Windows NT.
One little endian ...
"This is a revolution for SGI in that for the longest
time they maintained a sole allegiance to the MIPS
architecture, not striving to participate in the
Windows NT and Intel networks," said Jerry
Sheridan, an analyst at Dataquest.
You must have a red zone access token to enter this level.
For the last year, though, Silicon Graphics has
hinted at incorporating NT into its mix. And last
December, then-CEO Ed McCracken said that a
deal struck with Microsoft to create high-quality
3-D images on Windows machines was his
company's first step into the larger market for
graphically oriented NT-based systems.
Big whoop. Create some high-quality images on my commodity-priced video card.
The Wintel market is an obvious goal, given that
it's a giant compared to Unix, and that embracing
the de facto standard wipes out a lot of
300% Pure Java.
"It isnt just SGI feeling the pain," said Mark
Hardie at Forrester Research, arguing that just
about everything is heading in the Windows
direction. Hardie sees the inclusion of NT as an
almost inevitable step for Silicon Graphics. "It is
one engineering pain in the ass to make your stuff
compatible with other stuff; it chews up a lot of
resources," he said.
Heh heh. Yew said ass. Heh heh.
And resources are something the company needs
to conserve. It posted losses of US$37 million and
$31 million in the last two quarters and is in the
midst of restructuring that is designed to shed $200
million from its annual budget, as well as about 10
percent of its workforce.
Where's Bob Palmer when you need him to feel your pain?
Whats not clear is whether incorporating the NT
operating system means going after a chunk of the
more mainstream market. Silicon Graphics has
long focused on the workstation market, competing
with Sun Microsystems Inc. and its enterprise
systems, rather than the home-PC-makers of the
world. And the company says nothing is changing
on that front - although analysts got mixed
messages on just what path Silicon Graphics will
They're still trying to figure out what direction to take Cray in.
"We are not intending to step down into the $1,000
home PC or $500 PC market," said Robert "Bo"
Ewald, Silicon Graphics executive vice president
of computer systems. But Ewald did say that the
company is trying to access a bigger chunk of the
workstation market. The company press release
says Silicon Graphics will focus on its six "key
industries": communications, energy,
entertainment, government, manufacturing, and
Well that narrows it down to "Boldly going in every direction all at once."
But Forresters Hardie said, "If SGI doesn't think
they compete with PCs, they should think again."
Just like Apple.
The way he sees it: "SGI may not be head to head
with the Dells and Gateways and Compaqs, but
PCs have gotten more powerful, taken more of the
responsibility away from proprietary architectures,
and chewed up the market-space.... You can bet
the Gateways are all trying to soup up their current
architecture to be high end. If this means
partnering with other graphics folks, that's the
You'd better believe it. We've used farms of hundreds of Indigos and Indys for
physics analysis for years. The next generation farms will be hundreds of
Intel boxes running Linux. Plus, possibly, some really huge O2000 or Alpha
boxes. When you need to buy 400,000 MIPS, there are a couple of ways to go.
Tom Copeland of International Data Corp. said
that many of Silicon Graphic's core markets, like
animation, have largely adopted NT too. With its
new Intel architecture and NT compatibility, the
company might have a chance to compete in that
market. "SGI has tremendous expertise in
animation and engineering, and they can provide
high performance servers that Compaq and Dell
don't have. Most customers need both," he said.
Or even all three.
The new Intel-based machines are due to hit
shelves by years end. But despite the generally
upbeat views of analysts, Wall Street was less than
impressed with the news. Silicon Graphics stock
lost a buck and a quarter on Tuesday to close at
Show me the monkey.
Still, the plan has potential in many peoples eyes.
"It certainly could provide an offering that
surpasses what is in today's market," said
Sheridan. "If they are able to make that transition
from MIPS to Intel architecture, I think there will
be a significant draw."
At this point, Silicon Graphics won't admit it's
aiming at the broader market. But if analysts'
hunches are right, the company could find
marketing some of the world's best graphic
technology to the lower price range a dicey
Like an STB Velocity 128 4MB AGP card for $135? I love competition!
"They [SGI officials] have said to me, 'It's
converting dinosaurs to pie charts,'" said
Datquests Sheridan. "It's taking the technology to
make a T-Rex [and using it instead] to create a pie
chart that gives visual data rich presentation on
sales percentages and provide a very animated,
Oh, a Model-T Rex? Please select color:  Black  None
Maybe thats why Silicon Graphics execs say
theyre not going there.
They'd better hurry up to where they're not going. The ship's leaving port.
For now, industry watchers are playing a game of
wait and see. "Everyone will acknowledge that
they have superior technology," said Sheridan.
"Certainly the plans are in place today, but the
proof is in the pudding."
The wishful thinking's in place anyway.
If we had some ham, we could have ham and eggs, if we had some eggs.