Capt'n the present "excursion" is just fine with yours truly..."cutting edge", LOL...The Street is blind...
Tuesday April 16, 3:17 pm Eastern Time
Reuters Business
SGI aims rebuild by helping military visualize future
By Peter Henderson
SAN FRANCISCO, April 16 (Reuters) - Before U.S. pilots bombed Afghanistan, they played the game.
The latest satellite pictures were fed into a computer attached to a flight simulator in which pilots were able to rehearse their mission to a target presented exactly as it existed hours before their actual take off.
Rather than the passive experience of watching a film, pilots were able to try out maneuvers, banking, diving, or even face a change in the weather to get the feel of what they would actually face when they came over the target.
Part Hollywood, part top-secret, the systems used by the military represent cutting-edge technology, and, perhaps, the future of computing.
Military contractors Lockheed Martin Corp.(NYSE:LMT - news) and competitor Boeing Co.(NYSE:BA - news) both used Silicon Graphics Inc. (NYSE:SGI - news) systems to help design their proposals for a U.S. fighter jet in battle. Lockheed won the competition last October.
``We are talking about how they design the future,'' SGI Chief Executive Bob Bishop said in a recent interview, explaining how the visualization technology the company sells to the military, film animators, medical companies and energy firms could affect daily life.
It is a leap into the future for a company better-known as Silicon Valley's past.
Silicon Graphics is considered one of the industry's dinosaurs in many parts of the Valley, since the company that helped found the high-performance computing industry nearly went belly up after an ambitious, but failed, expansion into lower-end computing businesses.
In addition to the technologists, who prefer to work on the cutting-edge, Wall Street has lost interest -- only three brokerages follow SGI, Thomson Financial/First Call says.
Buckingham Research upgraded it to a strong buy from neutral in February, but J.P. Morgan calls it a market performer and UBS Warburg has it on hold.
SGI'S share price has risen to more than $3 touching a 52 week high of $4.85 in mid-March from a 52 week low of 31 cents last September. It topped-out at $42 in late 1995 and previous rallies since have never lasted more than a few months.
Revenue fell in fiscal 2001, ended June 2001, to $1.8 billion from $2.3 billion the previous year and dropped further in the first half of the current fiscal year, although SGI turned a profit in the second quarter ended Dec. 28, thanks to selling a majority stake in a Japanese subsidiary.
NO SUBSTITUTE
Bishop says SGI's focus on proprietary systems tuned for visualization separates it from the mainstream computer market, which has become more and more of a market for machines based on commodity microchips running the free and collaboratively developed Linux operating system, or Microsoft Corp's Windows. And the high prices it charges reflect SGI's high performance.
Fortunately for SGI's business model, the defense industry is willing to pay a premium for the ability to make visual sense of huge sets of data said Sarang Ghatpande, a computer graphics analyst at D. H. Brown.
``These are the guys who are doing nuclear simulation, satellite imaging, military training. They don't want to cut corners,'' he said. For them, ``there is no substitute.''
The difference, SGI says, is that it handles one big problem, like drawing a big moving picture, while competitors' systems are best for many small ones, like processing orders.
SGI's average configuration, costing about $1 million, holds 32 processors. Moreover, these machines have the ability to scale up to hundreds of processors that can access much more highly available memory, keeping huge amounts of data close to the processors
The standard high-end Unix operating system machines of Sun Microsystems Inc (NasdaqNM:SUNW - news), International Business Machines Corp (NYSE:IBM - news) and Hewlett-Packard Co (NYSE:HWP - news), by comparison, top out at around 100 processors.
At best, SGI's approach is overkill for normal business transactions, as SGI learned. ``We took an excursion into those areas, we bled, we failed to make a difference, and we've retracted,'' Bishop said.
For the moment, he says, Silicon Graphics is satisfied with what it believes is a $17 billion to $20 billion market for visualization machines.
He dreams of a future in which businesses use more and more visual information, and suddenly competitors find themselves the laughing stock. ``Anyone who follows us, lots of luck,'' he said.
NEXT-GENERATION COMPUTERS COMPOUND THE POTENTIAL
The next-generation Silicon Graphics machine, expected in three years or so, will be able to handle nearly 33,000 processors, up from the current 512, if anyone wants that many. Since NASA paid $20 million for a custom machine with 1,024 chips, that does not seem out of the question.
But Ghatpande said that SGI's troubled history unnerves potential clients, concerned they might find themselves in a technological dead end if SGI's turn around does not succeed.
``SGI has a sort of checkered history in terms of finances, they've had a lot of layoffs and that doesn't paint a very good picture,'' he said.
``Everybody knows that the technology is great, but considering the million dollar investments in these super high-end systems, customers have to worry about investment protection.''
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