SGI shivers ahead of storm

Cuts, debt restructuring

SGI has launched a pre-emptive strike to outline its strategy in advance of what is likely to be some tough news.

The company is "restructuring", although it wouldn't say how many jobs would be lost, rescheduling its 2004 debt, and moving into the smaller of its two complexes in Mountain View. SGI will also sell a manufacturing facility in Switzerland.

Greg Estes, VP of marketing told us that reports last week that SGI would be stepping up its outsourcing to India were "completely overblown". After a visit by Warren Pratt, SGI's COO, to India last week, the local press reported that "SGI had plans to increase its R&D outsourcing to India". Not so, says Estes: "You always have plans to hire, but right now, we're not hiring."

SGI will concentrate on three areas of growth, said Estes.

It's proud of its Altix systems, which marry Linux to the IA-64 processor. This proves, says SGI, that it can charge supercomputer prices for systems with standard commodity elements. SGI sold relatively few Itanium systems, just twenty-nine in Q1 2003, according to IDC, but they netted $12 million in revenue, so that's the kind of high-margin business financial analysts are looking for. And that's twenty nine more than supercomputer rival IBM sold. (Hitachi sold 18 and Unisys 7 in this period).

"Not only do we have the fastest Linux machine but we have Oracle running on SGI. It's years since Oracle ran on SGI," Estes said.

SGI has responded to the extraordinary advances in PC graphics by boosting its own Onyx workstation graphics performance. Onyx was aging, admits Estes, and the more recent models show an 8x performance increase at a fifth of the cost, he claims.

And SGI will step up its storage sales, which have been declining in revenue in recent years despite the company's historic expertise in large shared memory computer systems. It has an OEM agreement with LSI Logic, bringing the former's CXFS shared file system to the latter's disk arrays.

"We're not walking away from MIPS or Irix," said Estes. "There are government and defense users with millions of lines of code. We'll ship Origins for years." While under intense pressure from Linux and desktop GPUs, SGI maintains that no one else can build the single low-latency shared memory systems that unlike PC clusters, "don't need futzing."

More news of the restructuring is expected this week. ®

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