SGI sets course for Wintel shore
by Ian Johnson
Special to Computing Canada
plesman.com
NEW YORK CITY - Silicon Graphics Inc.'s Richard Belluzzo has free rein to
turn the company around, and the new head honcho isn't wasting any time.
"We're moving really fast and I'm trying to make changes quickly," Belluzzo said in
an interview. "We're going to sell on our traditional strengths, which start off in the
engineering department."
Belluzzo recently turned his back on a 22-year career at Hewlett-Packard Co.,
where he rose to vice-president and general manager of the $35 billion (U.S.)
computer organization, to take over an ailing $3.7 billion (U.S.) SGI, something he
calls a big, but stimulating, switch.
"I was thinking to myself - do I want to retire, maybe early in my 50s, and be one
of the great guys at HP who did a lot of important things, or try something new and
challenging.
"Maybe it was a mid-life crisis, I don't know, but I reached a point where I said I
want to do something really outrageous. And this is it. I'm learning a lot and I tell
people I'll be much more valuable in a year or two now than I would be if I'd
stayed at HP, because I'm dealing with issues and learning things that I never would
have at HP."
Just two-and-a-half months after replacing Ed McCracken at the helm of the
Mountain View, Calif.-based company, Belluzzo gathered his top executives in
New York to announce a new course for the beleaguered Unix vendor. Belluzzo's
plan to put SGI back in the black includes selling off technology, cutting staff,
revamping SGI's sales strategy and taking the company straight into the heart of the
Wintel fray.
"The fundamental reason for the changes is the external forces," he says. "Our
business model is being attacked on the desktop by the growth of NT, and in the
server area there's increased competition from NT suppliers."
The company is streamlining its operations by selling Cosmo Software and splitting
up its MIPS Technologies subsidiary. SGI's Computer Systems Organization will
continue to develop MIPS chips for its high-end machines, but will spin off the
group that shipped more than 45 million MIPS processors for the consumer and
embedded systems market in 1997, selling at least a 20 per cent share of the new
company.
SGI's restructuring plans also call for the Cray supercomputer line to be gradually
consolidated with its server lineup. In total, the company plans to cut about $200
million (U.S.) from its operating budget this year, mostly through downsizing.
Steve Gomo, SGI's chief financial officer, says 1,000 jobs will disappear through
the Cosmo/MIPS deals and attrition, rather than through layoffs. Company officials
could not confirm whether any of their 140 Canadian employees would be
affected.
"We've got some restructuring to do," says Belluzzo. "We've got to get a lot of
money out of our admin structure, for example, because it's very complex. We
have dissimilar systems, a lot of them, and it's ugly and expensive . . . and I want to
put more money into products than salespeople."
SGI officials outlined a strategy that concentrates on communications, energy,
entertainment, government, manufacturing and science - areas where the
company has traditionally done well. Gomo adds that SGI will reduce its 23
business units to six profit centres: high-end graphics, Origin servers, Cray servers,
service and support, Unix workstations and Windows NT workstations.
This is the first foray into the Wintel arena for SGI.
But rather than trying to tackle entrenched NT players such as HP and Compaq in
the high-volume commercial workstation market, SGI is focusing on technical
computing. It will go after customers in areas such as strategic business analysis, as
well as Web and media serving, who heavily rely on visual computing on the
desktop and supercomputing applications where SGI's high-bandwidth system
architectures make an impact.
The company says it will release its first NT workstations using 32-bit Intel chips
later this year, and plans to develop NT servers around Intel's 64-bit Merced
chips. The workstations will be manufactured by a third party, and SGI has
development and marketing agreements with Intel and Microsoft for its visual
computing technology.
"We're not going to go out and try to win the general desktop business," adds
Belluzzo. "Our product line is going to be very focused on the visualization and
graphics end, so I suspect we will have pieces of companies' business in their
creative and visionary departments, and this is where we'll tend to compete."
Jerry Sheridan, director and principal analyst with the computer systems and
servers program at San Jose, Calif.-based Dataquest, says Belluzzo's experience
should help SGI crack the NT market. "Rick at HP participated in a
dual-architecture strategy, having both the precision architecture with HP
processors and the Intel/Microsoft Windows NT solution, so he brings that
expertise to SGI."
SGI officials add that their commitment to Unix remains strong, and that the Irix
operating system will be ported to the Merced chip.
Todd Johnson, SGI's vice-president of marketing, says it will be business as usual
for SGI's Unix customers, and adds the company is still working out a Dell-like
sales strategy for its NT workstations that includes direct sales over the Web.
Dataquest's Sheridan says that if SGI executes its transition to NT smoothly, it
could do well despite heavy competition. "I think the potential is there for a
tremendous amount of success for SGI," says Sheridan. "Just the name of SGI
definitely garners significant recognition in the industry, and if they are able to
translate that and bring it into the NT environment I think it would be a very
attractive offering."
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