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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 90.20

-0.7%

3:59 PM EST

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To: djane who wrote (4928)	5/27/1998 4:30:00 PM
From: John M. Zulauf	of 14451

> Jesse Berst, Editorial Director Jesse Berst, what a great contra-indicator -- all the prescience of an astigmatic mole. Being on his hit list is almost as good as being on the cover of Business Week (or Sports Illustrated) is bad. Note he lumps Intergraph and SGI as makers of "proprietary workstations." Excuse me but isn't Intergraph a maker of NT workstations? They went out of their proprietary workstation (and CPU) business long ago. Intergraph is the poster-child for how to screw up in the NT workstation business. Hopefully SGI has gone to school on Intergraphs errors -- something I believe the new management would most certainly do. Upper management at Intergraph has succeeded in alienating customers and employees alike (see www.maxvision.com to see where the best of them have gone) -- and appears to be unlikely to be changed. Intergraph has survived only on it's software business and by selling off it's assets. SGI is in the midst of the "innovative overhaul" Berst claims to be the only hope for his DOA candidates. SGI has new top tier management. SGI's "proprietary" technologies allow it to penetrate markets NT (even on Merced) will be unable to touch for the forseeable future. At the same time it has in place a strategy allow it's core strengths a broader marketplace using NT. Remember also that SGI isn't just a workstation player. Their high-end systems are going to be increasingly popular as the WWW populace gains ubiquitous high-speed network access. A server that plods along at 56Kb/s is fine when the user's modem runs at half that speed. When the user's pay the big buck for their ADSL or cable modems, they're going to "vote with their feet" for the sites that can keep up. Add to the mix "digital video servers" for WWW and "video on demand" applications, the demand for large powerful servers like the Origin 2000 (and it's Mips and Merced successors) has the potential to grow explosively. As for current stock price, the market is in "show-me" mode, and rightly so. I believe those who get it (or stay in) now will reap rich rewards within 2 years. It is certainly a speculative play, based on one's faith (or lack thereof) in the new management team. Given that SGI is only $3/share above book value, the downside is primarily in terms of "opportunity cost". just my humble opinions, john zulauf

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