<I allowed an investor IN LOVE with SGI to convince me Utopia had only begun.>
Why do I get the impression everybody is talking about me?
Well, I admit I was bullish on the stock when it was selling in the high 20's -- I was still expecting to see the new 02, server and supercomputer workstations take off. Instead we had some sour quarters of missed earnings, and a dwindling share of the graphics workstation market.
In fact, the only reason the stock is rising now is the new CEO announcement. Lost in all the enthusiasm is the fact that SGI missed earnings estimates again, and is unlikely to post good earnings next quarter, when the R12000 chip and new Windows products will still not be available. As they noted in the conference call that means everything hangs on SGI's server market -- and it looks like the competition's servers have been growing a lot faster than SGI. Belluzzo is not likely to affect the bottom line before that -- even if he shakes up the marketing department. Maybe the impending release of new products will drive the price up, but I can also see the stock coming down again with a thump. It is clear that SGI is going to going to be facing the formidable marketing engine of Compaq, which will be making Alpha-chip NT workstations and servers.
Belluzzo's remarks during the conference call suggested to me that maybe he was going to change the SGI model of making exclusive, expensive, high-margin machines -- he said he didn't want to "find a hill and defend it." So far, so good. I also think they might spin off MIPS -- since they talked about being very cognizant of the cash value of this asset. Regardless, I bet we see more reorganization and restructuring charges, and more layoffs.
However, beyond the next four months, I think SGI could be well-positioned. I think a year from now, SGI could be king.
Anyway, I am still heavily invested in SGI. I guess I'm looking for about $19 before selling, but the momentum has been impressive. I figure it could go on for another month.
Any rumors on what SGI's NT machine might be like?
Anybody watching insider trading? --JD |
