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Technology Stocks : Silicon Graphics, Inc. (SGI) -- Ignore unavailable to you. Want to Upgrade?

To: Esvida who wrote (3611)	12/2/1997 7:35:00 PM
From: Bill Holtzman	Read Replies (3) \| Respond to of 14451

Recently I paid the company a visit. I experienced the "Animatrium," a 160 degree visual presentation of some popular applications using SGI machines. These included flight simulator (I lasted a while then died), a trip to a Vatican museum unburdened by gravity, and a drop into earth from a few hundred miles up to just a few hundred feet. It was cool. I also spoke at length with two of the investor relations folks. They were quite receptive and didn't get too annoyed with me until I'd been there for several hours. In response to your questions about IRIX, Al, the answers were all simply that SGI has no intention to stop using IRIX or to relegate it to some lower status. They didn't seem annoyed by the question but did give the impression that no one was seriously considering this course of action. I didn't really understand the significance of your third question and neither did they. I didn't get to ask the fourth. Someone else had asked when they'd get a new CFO. The answer is after they get a new CEO. I asked if they were staging an IBM-like search for someone. I got no impression that anything out of the ordinary was afoot. I asked about Maya. SGI only creates applications to accent their machines and help show developers what they could do with SGI hardware. They tread a fine line in software, trying not to cut into any of their developers markets. Maya will have no significant direct effect on the bottom line. A major problem is forecasting revenues. They blame this area for the disappointing earnings, as opposed to excessive costs. I asked why they can't get a better grip on what the sales groups are doing (i.e. don't they use the internet to report activities?). Again the answer was vague, simply reiterating the "it all happens at the end of the quarter" line. I asked why they don't, when asked about expected results, tell the analysts they just plain "don't know" what to expect, as that would clearly be the only correct answer. The answer to this was vague, but they implied that they really don't lead analysts anywhere. I asked about the two day furlough after the huge quarter four of last year. Did it have a bad effect on morale? They seemed to think it wasn't a big deal. Given the cash situation, I didn't really understand why it was necessary to begin with. As far as layoffs, I was told that somewhere around 700 people got the axe recently. It was all done quickly, which I've heard is much better. I've also heard that the first round is pretty easy, but the second is more gut wrenching and disheartening. I asked about why SGI servers are the best and why it hasn't translated into sales. They replied that marketing is going through a transition similar to the one Sun went through years back. They are reorienting from selling to technical people who know what they want and know quality to selling to other types of people who respond more to image, a good sales pitch, and inexpertly perceived quality. The transition is very difficult but they are committing more to marketing. I asked if this would be enough. I mentioned that IBM is on TV these days bragging about their highly scalable servers. I questioned why SGI doesn't get out there and fight this attempt to portray IBM equipment as the best. It seems to me SGI must climb the highest rooftop and shout out how great their machines are or their customers won't know. They've got to change character and become brawlers instead of geeks who hang out at Fry's. The response to this was not meaningful. Since SGI has recently gotten customers to start paying up on overdue balances, I asked if they'd been too easy over the years on customers. I said SGI products are so good, why can't you be more demanding of those who want them? The answer was no, they haven't been soft, rather the business processes which get blamed often now are the culprit. The accountants lacked the discipline to keep up with it all, and bills fell through the cracks. As for NT, it seems like a small product line will be maintained around it but it won't be of huge significance. I asked about Everest. They had nothing to report. They were surprised when I told them I had listened to the press conference by Ed regarding Everest. They didn't know the phone number had been posted on SI. I remarked how amateurish this conference had sounded and how poorly this reflected on Ed and the company. They didn't shore up my faith in this program or Ed. They were defensive about Ed, sticking up for him just as they'd cheered him at the annual meeting. It's all well and good to rally around an old leader, but as a shareholder of the last five years (as opposed to the previous), Ed's done nothing for me. I wanted to suggest that he stopped doing good for the company when he stuck around too long. I was asked how SGI could better reach individual investors. I said this forum was one of the best ways. We talked about other websites, like Microsoft's where you can get financials downloaded directly in Excel format. I told them that their recent practice of e-mailing press releases was a great idea, since it gives us immediate access if we happen to be on line at the time. All in all, my impression stuck with me that they just aren't tough enough for the open markets. They like the technical markets, selling to other highly trained engineers. When it comes to other sales, it doesn't seem to come natural. They haven't alot of interest in the posturing and image chemistry that builds confidence in Joe Purchasing manager. I suggested they needed a "quantum leap" in marketing, not just a "here's more money, work harder" policy. They seemed to think a new ad agency would do that. I'm of the opinion that only new leadership can provide the attitude and vision to bring them out of the clean rooms and into the mainstream. Bill