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Technology Stocks : Silicon Graphics, Inc. (SGI)

SGI 93.81

-0.5%

Dec 12 3:59 PM EST

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To: Michael Madden who wrote (473)	12/3/1996 8:55:00 AM
From: Richard S. Schoenstadt	of 14451

Thanks for the response. It appears to me that if SGI, in the past, could charge premium prices for upgrades such as additional memory or maybe even design their machines so that only SGI products would work (and I am guessing they did this to an extent), that would be a fatal error in the current competitive climate. I think people are really turned off when they buy a machine for x dollars and then find that to make it work properly they have to spend a lot of money on very expensive upgrades. It's nice to hear that you can buy memory from alternative sources. This is one advantage of the intel world. Almost every add on is available from alternative sources which makes for constant improvement and competitive prices. Also in the article I mentioned by Becky Waring she mentions that additional ram is what she calls inexpensive sram. So I believe the claim in that post about ram prices was inaccurate. The question I still would like to resolve is how big a breakthough the 02 is. Pricewise it appears to be very competitive with Intel products. The question is how do these 02's perform compared to similiarly priced intel products? It seems to be that SGI has to maintain a price/performance lead or it will slowly hemorrage. A couple of other points. With respect to MIPs and Nintendo. According to one article I came across Mips only designs the processors. Other companies such as LSI manufacture the chips. Therefore SGI will only receive royalties. I don't know how much. Also I believe the point has been made already. This may be what you meant by embedded processors. But having your processor or a modified form of it, in such a popular game machine is important for the long term viability of the processor family. They will probably sell far more mips chips in games then they do in computers. They are also working on settop boxes for internet TV, again using a variant of the mips chip. This too is a market potentially far larger then their computer market. There is an article on the nintendo game chip in the latest Byte magazine. At the end it says new processes allow the chip to be made at lower costs and higher volumes - making them appropriate for consumer machines and embedded systems. And "Because of the chip's roots, software developers can apply their expertise to the R4300i and hardware designers can use it to build products for new markets." So it would seem in terms of chip cost and design these additional markets ought to keep the MIPS chip alive for quite some time. And on last point. Another article I came across indicated that apple and SGI formed some sort of alliance last spring - to make their products easier to port from one to the other. This was clearly aimed at fighting intel inroads. Right now I am considering buying SGI but I haven't made my mind up yet. From a psychological point of view it is critical that 02 sales take off. And that is what I am trying to find out. If the 02 is a blockbuster seller, then the stock price should respond in the shortterm, no matter what the long term outlook. RS

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