Back after a two week vacation -- thanks guys for taking such great care of the stock. When I left we had an upside earnings surprise and the stock was headed for $20. Now the CEO has resigned, SGI is being sold piecemeal to the highest bidder and it may soon struggle to avoid a new low.
My own opinion -- SGI is not doing too badly here. The last quarter was unexpectedly strong due to a resurgence of SGI's core business in UNIX servers and graphics -- the part of SGI that is slated to survive this shakeup. SGI's future lies in supplying the massive bandwidth needed for distributing video over the internet. That has always been my feeling -- but these markets may need more time to mature. On the other hand, SGI may be sitting on a volcano here. Time will tell.
Dumping Cray is a painful but necessary decision. It has been obvious for years that the purchase of Cray was a fatal misstep for SGI.
I am surprised to hear the NT systems are being handed off. I felt that these machines would eventually win the confidence of a certain segment of consumers, but its really no surprise that SGI was not an able player in this arena, where the rules are controlled by Microsoft and Intel, and larger players already dominate. This investment was always a long shot in my opinion, and would prove costly to continue.
I am not so sure about our new CEO. Frankly, as noted before, Apollo and Digital are not inspiring examples I want to see SGI emulate. But -- they did get sold, so maybe that will happen to SGI too, although it would not be my first choice.
SGI has changed a lot in the last year -- and more layoffs are painful to contemplate. But I think the company that emerges will be in a much better position to make money than it was before. If the new leadership simply steers the current course, I think we will see some more profitable quarters and a nice improvement in a stock that is still, in my opinion, undervalued.
I'm now sorry I held on through the last rise to $19, but in truth, nothing in these announcements suggests that SGI will be losing more money. I plan to hold on for now, but I've decided not to buy any more for a while until I get a better feeling for this new CEO.
--JD |
