By William Fellows
Silicon Graphics Inc has bitten the bullet and will shed its non- growth and none-core businesses including Cray, the ill-fated Windows NT workstation unit and MediaBase, which it expects will save it $300m expenses at the cost of up to 3,000 jobs. Between 1,000 and 1,500 of SGI’s 9,000 or so jobs will be lost during the reorganization, with up to 1,500 others going with the divestitures. SGI couldn’t give an estimate about how much revenue it will be doing when it comes out of the tunnel.
SGI will instead concentrate on three businesses going forwards: servers, broadband internet kit and graphics. Intel and Linux will be the driving forces as the MIPS RISC falls off SGI’s roadmap in the middle of the next decade and Irix Unix features are folded into Linux with the help of Veritas Software Corp.
The gamble that SGI’s CEO Rick Belluzzo took on NT appears has backfired. NT workstations have failed to meet expectations, bringing in just $50m revenue last quarter and while new Intel servers will run Linux or NT, it’s clear that the non-Microsoft option is its direction. SGI says it is creating a joint venture with a third party that will take over the unit and continue development and distribution of the products. Dell Computer looks the most likely candidate.
The demise of SGI’s NT strategy probably sounds the death knell for Fahrenheit, the next-generation graphics APIs it is working on with Microsoft and ostensibly Hewlett-Packard Co too. Belluzzo said SGI is working with Microsoft to find a way forward.
SGI says it will set up Cray as an independent subsidiary and then find a buyer for it. Cray, which SGI bought three years ago for $750m now accounts for less than 10% of SGI’s $2.7bn revenue. The unit will be headed by current VP engineering Steve Oberlin. It will continue to pursue the vector-based product roadmap as well as the co-development with SGI of a next-generation ccNUMA products for SGI. Its Chippewa Falls, Wisconsin and Eagan, Minnesota plants will be responsible for the Cray T90, and the new SV1, SV2 and T3E.
SGI will spin off MediaBase, its media streaming application, engineering team and technology to a new company with venture capital backing, in which SGI will hold a minority stake.
SGI says that a new product architecture it plans to introduce nine months from now will support either MIPS or Intel and will provide twice the performance of existing systems at 30% less cost. It estimated Merced systems are 16 or 17 months out.
On graphics SGI will extend its agreement with Nvidia such that its 3D graphics engineering team will become Nvidia employees but will cooperate on the development of future products. Nvidia will service the low-end of the market, while SGI will continue to service the high-end.
SGI will create a new business to build servers that will deliver broadband internet services and content. SGI believes the advent of broadband internet will require the replacement, not simply the upgrading, of all internet equipment.
SGI is going to increase its reliance on Veritas for help extending Irix and Linux. It’s also going to have NEC sell its high-end servers in Japan under a plan to be announced August 19 in Japan. The irony is (and doubly so if NEC ends up being Cray’s sugardaddy) that while NEC is a MIPS fabricator, SGI’s Cray unit recently won an anti-dumping case effectively barring NEC from off-loading vector supercomputers on to US markets. SGI’s share price closed down $3.44 at $12.75.
