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Technology Stocks : Silicon Graphics, Inc. (SGI)
SGI 90.05+0.3%Dec 24 12:59 PM EST
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To: Jerry Whlan who wrote (1132)4/19/1997 1:23:00 PM
From: Paul Jamerson   of 14451
 
Very little is made on the processors. In the grand scheme of the business, the royalty from NEC and Toshiba is very small. The original royalties from the r4k fab houses was higher. Remember the royalties from NEC and Toshiba goes back to paying for the processors from these companies. The agreement with them was not to get the processors for free. In idt's case, sgi may get more if the royalty agreement covers the r3k, r4k derivatives for microcontrollers. That I don't know.

As for the Sony playstation and Nintendo64, the original agreement had more to do with getting volumes up than generating royalty. At that time the royalty revenue was small as a percentage of revenue, profits. In light of the recent quarters, considering earnings have gone down significantly, SGI may need this royalty. This would be a very bad sign that things are not going well. Only the top management knows.

SGI should be in the business of expanding the computer sales. This would be better serve if they use a main stream processor. I agree that the Intel and PowerPc may not be as powerful than the r10k, and
the next generation. It does have one advantage, that is software. SGI's greatest worry today is that graphics ISV will begin to port to Intel NT boxes. Once that happens, the low end is gone. SGI will have only the high end. They will always be king in that area, but there isn't enough growth to justify the preminum stock price. We have all seen what happens to stock price when the revenue and earnings stop to grow.
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