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SGI Warns That Bankruptcy Might Be Year-End Option
tbcpp writes "OS News reports: "SGI issued its most ominous regulatory filing to date, warning that a bad 2006 could force the former high-flyer into bankruptcy. In order to improve its business, SGI will consider measures ranging from axing or selling off product lines to pursuing 'a strategic partner or acquirer.' The hardware maker will basically look at anything and everything to remain a going concern.""
They backed the wrong horse (Itanium) and don't appear to have a Plan B. We have some nice parting gifts and the home version of The Silicon Valley Company Game.
SGI's heyday was when most people thought of them as The Purple Computer Company; the Jurassic Park Era. And yes, their lack of a brand identity and strategy was part of their undoing.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
This would be a real shame as SGI has talent for engineering great systems. The Altix is a really nice architecture, the idea being you start with a 4 CPU node and can scale to a very large system with a single system image, high availability, easy scalability of memory, cpu, storage and interconnect, and has nice management tools for partitioning, etc. Unfortunately the price of entry is a bit high, and I think that perhaps going with IA64 rather than the budding Opteron was a misstep at the time.
I also feel they lost a lot of momentum by dabbling in various unpopular markets like high end NT workstations, expensive specialty graphics workstations (given this was a core market for them earlier, but high power graphics became commoditized) and didn't really strongly launch into the linux server market and make a big presence in time. If they had pushed a cheaper starting system for a scalable single system box they may have done better, but who knows.
The fat lady has been following them around for a long time.
SGI faced the innovator's dilemma big-time; it was tricky to cannabalize their $2 billion workstation business for a $300 million graphics card market. And to move from being a full-system vendor to being a graphics card vendor. And even with all the management and business-issue problems, I noticed three problems their engineering effortsg never overcame:
- trouble with quality and shipping on time (see IMPACT)
- couldn't match/switch from 3-4-year development cycles of the workstation business to 6-month product cycles of the PC graphics card business
- engineers were loath to give up control of the chipset/box/OS in order to settle for just controlling the graphics subsystem. They tried to be a full-system player in a PC world. Given that Compaq couldn't really do it (something that was at least semi-obvious at the time), its not a surprise they, coming from the workstation space, couldn't do it with their integrated NT workstations.
- The engineers were delivering product that was differentiated but not in the areas that the biggest customers cared the most about. The benefits of UMA (unified memory architecture) graphics just weren't in sync with what the market most wanted: the fastest 3D at the cheapest price. And in the classic workstation space, polygon-pushing was what was most needed. Half their business was CAD workstations and in the end they lost that to Sun/HP/IBM who didn't have the sexy texture mapping stuff but could render polygons "good enough".
SGI also benefitted from many years from the other workstation vendors under-investing in 3D graphics. When that era ended, even the workstation business they were in got a heck of a lot more competitive.
Anyway, that's what comes to mind when I remember back to SGI in the mid-90s. In hindsight, I don't know of any silver bullets that would have gotten them out of the situation; it was death by a thousand cuts. At the time, I wondered if a merger with Apple would have made sense but it wasn't clear that the disfunctionality of the two organizations at the time would have melded into something better. (11072394) Maybe a damn good CEO could have helped them carve out a more defensible role in the industry; that's the only thing that got Apple through as far as I'm concerned.
But their stock performance was very, very mediocre, and I wondered why so many smart people could do things that don't shine in terms of corporate results.
In the late 1980s I saw the same thing happen with a Hyundai. Motoring magazines reported on a really nice sporty little car they'd prototyped. It was really cute two door, a unique looking convertible that would have sold like hotcakes. Then as it got closer & closer to release it gained full rear seats instead of being a 2+2 layout. Then it got a bigger trunk for more luggage, a fatter roofline for more rear-seat passenger room. The "radical" front styling was softened, then it was given another two doors. In the end it was just another small four door hyundai, and when released was received so poorly it never made it out of Asia.
A press statement from Hyundai stated something along the lines of "market anticipation failed to convert to sales" when it was canned. That's because the beancounters, the conservative marketers massages the product into something virtually the antithesis of the original product the market built up its anticipation about.
Seems a common theme in the big companies, where something good is created but because of a lack of forceful "no. don't touch" from smart management everyone gets to poke their fingers in and change things, making Yet Another Lowest Common Denominator Product.
It's amazing how quickly people forget. Ricky "Microsoft Mole" Belluzzo is the reason SGI got it's head-shot to begin with. Remember Rick? Yeah, he was the guy who, while working at HP back in the mid-90's, made the announcement that HP would be "dumping HPUX in favor of Windows NT" without any warning or approval, forcing HP to do the world's larged backpedal ever seen.
He then went to sabotage SGI with the SAME STUPID GAMBIT, before finally going "home" to Microsoft.