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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 88.96

-2.3%

Dec 17 3:59 PM EST

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To: Don Green who wrote (9964)	4/28/2002 11:16:44 PM
From: Thomas A Watson	Read Replies (2) of 14451

I don't know of the formula SGI uses for pricing. SGI's 3000 series with graphics pipes are high SGI original content and their is no competitor really. Workstations have much competition. The variance of margin would be more a function of the customer and competitive pricing pressures. Some customers spec the system and only want to buy all from the same vendor. Some buy the unique parts of SGI and then may go to third party sources for disks and memory that can be had for a less but require more in-house systems expertise. SGI sells direct to Uncle and I'd guess GSA pricing is set once a year and as commodity parts get cheaper SGI margin would get better as the year progresses. Also SGI sells to system integrators who take SGI systems and resell them to Uncle. The resale process for the OEM's is cost plus a percent. OEM's would have little incentive to nickle and dime on costs. The more OEM's pay the more they charge. Also OEMs don't want to spend additional time doing multi-vendor systems integration. Also in a DOD fielded system all parts come under configuration control and this means that it's a lot cheaper to buy all or as much as possible from a single vendor, SGI. Also in the current climate with who knows what kind of intelligence systems being created SGI with 300 cleared employees can provide valuable virtually sole source consulting and unique systems integration. SGI's federal systems group is unique. So I'd guess that all SGI sales to Uncle direct or indirect have the highest margin. In other fields it would vary by the integration philosophy of the customer at a corporate or even at a sub divisional level or individual purchaser. tom watson tosiwmee

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