Here's an article from "Welcome to I, Cringely" who regularly appears on PBS. Some real soul-searching for investors like some of us who are stuck with losses on SGI.
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By the time it was clear that the 3-D graphics business was fading, the World Wide Web was supposed to take over. And true to SGI's glorious history, the company developed some of the best Web development tools around. But Web development tools, like 3-D animation tools, don't have to be run strictly on SGI boxes. There are many more Web servers than Web development systems, and the best price-performance Web servers are Intel-based, a fact that will soon come home not just for SGI, but also for Sun and Digital.
So what's to come of SGI? Well the boss, Ed McCracken, will soon be history. And the company itself will follow one of two courses. First, they have to get their profit margins up by taking cost out of the hardware. This means embracing the demon by building (or buying) Intel boxes running Windows NT. The days of SGI's custom hardware, and even its very powerful line of MIPs processors, are fading. The second course, which isn't at all in conflict with the first, is that the company will be sold. Certainly the MIPs processor business has to go, and maybe the rest of the company with it. MIPschips certainly aren't going to go away, since there is one inside every Sony PlaySPtion. And there are tons of MIPs R-10000 chips at the heart of every nonstop mainframe from Tandem Computer, too.
Tandem is now owned by Compaq. Tandem needs MIPs processors, which means Compaq needs MIPs processors. Compaq would like to dominate the 3-D graphics market and would also like some advantage in Web development tools. Compaq can also use all the good engineers it can find. Is a pattern beginning to emerge here? Look for Compaq to take a strong run at SGI.
This business of superstrong companies acquiring weaker ones has taken a strange turn. John Chambers, CEO of Cisco Systems, says he will acquire 12-15 companies this year, not just for their products but mainly for their people. Cisco is growing so fast and good engineers have become so hard to find that it is sometimes worthwhile to buy
the company, and scrap the products just to get a few good programmers. Microsoft does the samething. Try to find anywhere in Microsoft's product offerings the work of the Myhrvold brothers, whose
company was acquired by Bill Gates several years ago.
SGI isn't the only company going through growing pains. Apple has them in abundance, too. This week Steve Jobs said he would stay as CEO, but only on an interim basis. A CEO search is supposed to be continuing, with the plan being to hire a new guy or gal by the end of the year. Not according to Larry Ellison, who sits on the small Apple board of directors. Larry told me three weeks ago that Steve had already decided to take the job for real. And even if he's changed his mind, there is no current CEO search underway in Cupertino. Thee's no way Apple will have a new head hincho by the end of the year.
What Apple MAY have by the end of the year is a biggish chunk of cash in exchange for the Hardware Division. Repeating the lesson learned at NeXT, Apple appears to be getting out olf the hardware manufacturing business. Though unlike NeXT, Apple isn't dropping hardware entirely, just the manufacturing of hardware. There is so much available high-quality manufacturing capacity in the Far East that Apple can make more money through contracting its manufacturing than by rolling its own. Expect several thousand Apple employees to
depart with the factories when a buyer is eventually found.
As a guy who worked at Apple a million years ago and can remember times when the whole company would pack Apple IIs in boxes, this move out of building computers makes me sad. But it has to happen if Apple is to have the resources to compete. Steve's right about this. It's all part of his plan to turn Apple into that Hun in the sun. |
