"Bringing Cray Into SGI Fold On Company Chief's Agenda "
Date: 7/20/98
Author: Michael Tarsala , Investors Business Daily
Rick Belluzzo has supercomputing on his mind.
The chief executive of Silicon Graphics Inc. is
making development at the company's Cray
Research supercomputing division a top priority.
The goal is to completely integrate the Cray division,
purchased for $767 million in '96, with the rest of
SGI.
Part of a corporate restructuring plan spelled out in
April, the integration of Cray into SGI is a major
step in steering the struggling company back on
track, Belluzzo says.
''After the acquisition, we did a good job of
integration in the field - where we call on
customers,'' Belluzzo said. ''But that's about where it
stopped.''
Until Belluzzo took SGI's top job in January,
replacing Ed McCracken, Cray was separate from
the rest of the company. SGI seldom used Cray
technology in its servers and workstations. And
Cray made few, if any, contributions to SGI's
bottom line.
Belluzzo now has a grand plan for Cray's
supercomputers, which are used for complex
computing tasks, such as simulating nuclear blasts
or car crashes. In essence, he wants to blur the line
between the elite supercomputer and the more
standard server.
His ideas include making expandable
supercomputers that have features similar to a
server. And he wants SGI's high-end servers to use
more Cray technology.
''We want to redefine supercomputing,'' Belluzzo
said. ''In the traditional sense, it's been trouble. The
model doesn't work.''
Whether or not this new strategy works remains to
be seen. SGI overall has struggled over the last
three years. It reported $708 million in sales in the
third quarter ended March 31, down 22% from the
$909 million it reported in the same period for '97.
SGI lost 81 cents a share in the '98 period,
compared with earnings of 6 cents.
First Call expects SGI will report a 25-cent loss for
the fourth quarter ended June 30. The company is
due to report earnings Thursday.
Also, Cray doesn't move as many machines as its
major competitors. The company has been losing
market share to such companies as IBM Corp. and
Sun Microsystems Inc. SGI's supercomputing unit
slipped from 7% market share in '96 to 5.7% in '97.
SGI will take its first step in late '98 with a new
Cray computer line called the SV1. Aimed at
tackling government, scientific and technical
manufacturing tasks, the SV1 has processors
designed to handle 4 billion calculations per second -
twice as many as the company's older
supercomputer chips can manage. The machines
range in price from $500,000 to $10 million.
Cray rules the niche for the world's fastest
supercomputers, analysts say. A recent list
compiled by the University of Mannheim in
Germany and the University of Tennessee reports
200 of the world's 500 fastest supercomputers are
from Cray. It's a stable business for SGI, even
though it's not growing.
''There's no reason to give it up,'' said Ken McBride,
an analyst with Salomon Smith Barney in San
Francisco.
SGI has no plans to upgrade its former high-end
supercomputer, the T90. But SGI still plans to sell it
for another two years. SGI plans eventually to
replace both the SV1 and the T90 with the SV2,
White says.
The SV1 is designed to be more expandable than
some of Cray's older supercomputer models, says
William White, product marketing manager. It can
take on up to 1,024 processors. Previously, Cray's
top-end scientific machines could only go to 32
processors.
The SV2 will be a somewhat flexible one-size-fits-all
machine, according to McBride. It will work with
SGI processors, as well as with Intel Corp.'s
Merced microprocessors for more lightweight
applications.
Using microprocessors in supercomputers is one
way supercomputers will become more like servers.
''The traditional Cray product was
supercomputers,'' Belluzzo said. ''But
supercomputers tended to mean very specialized
systems. What customers want is high-
performance computing. They don't care if it's a
supercomputer (large processor) or a big
(microprocessor) cluster.''
Another way Cray supercomputers are becoming
more serverlike is that they now can run
applications at double speed each time the number
of processors in the computer is doubled. That's
expected with servers, but it's never been done with
supercomputers until the SV1, Belluzzo says.
Within the next few years, SGI plans to offer
another high-end line closely related to the SV
family. The new high-end servers will use some
supercomputer technologies. Some of these
changes could happen as early as '99.
''We're taking our Origin erver) line and extending
it,'' Belluzzo said. ''Next year you'll be seeing some
of these changes.''
Analysts say SGI's strategy makes sense. Many
server technologies come from the supercomputer
world - especially ones that deal with the way data
are routed more quickly.
''I think that's a good strategy,'' said Brad Day,
analyst with Cambridge, Mass.- based Giga
Information Group. ''Where the server business is
going is who can build the fastest interconnect and
switches. It's no longer limited to the server itself.''
SGI has a chance to take top-notch data-routing
technology from its supercomputer lines and use it
in servers, Day says.
Belluzzo, who spent 22 years with Hewlett-Packard
Co. before coming to SGI, helped oversee the
creation of one of HP's most successful high-end
server lines, Day says.
''He understands what taking the best of engineering
talent to create a new box can do,'' Day said.
Others also have been successful in tapping
supercomputing technology for servers. Sun used
technology purchased from Cray before the Silicon
Graphics acquisition to help create its top-end
server line, which was introduced in '97.
''(Belluzzo's) not the only guy doing it,'' said Mark
DiCicioccio, a San Francisco-based analyst with
Lehman Bros.
Supercomputer technology is especially useful for
server customers that need hardware and software
combinations that work fast enough to support
millions of Web users, DiCicioccio says. He believes
a substantial part of SGI's future -as well as the
futures of other server companies - is tied to the
Internet.
''If they can take the expertise of supercomputer
technology and make that applicable to the Web, it
could be a key to SGI's success in the Web,''
DiCicioccio said. ''They're not associated with that
today in a big way.''
Mang
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