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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 93.37

+2.0%

1:19 PM EST

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To: Mat Miller who wrote (996)	4/5/1997 6:13:00 PM
From: Bill Fischofer	of 14451

The pie will certainly expand but SGI's future share is less clear Intel is actively targeting graphics as one of the major areas for its expansion. I think it's pretty clear that SGI doesn't want to go toe-to-toe with INTC in the battle for the mass market. Fundamentally, the problem is that most of the high-end graphics software that only ran on SGI's boxes is being (or has already been) ported to NT, so they're going to be under ongoing side-by-side comparison pressure. To use your C&L example, how fast is that program going to run on a Compaq NT/PPro workstation, and at what relative cost? The margin pressure at the low end will only get worse as time goes on and the question of how much premium can be charged at the high end is a delicate one. For the non-graphics high-end I wonder if INTC won't be content to see SGI and SUNW fight among themselves while they quietly mop up. One has to wonder if a forced merger within 2-3 years is in the offing.

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