BusinessWeek. What Makes Rick Belluzzo Run?
[I'm glad it's not a cover story like in 7/95...]
businessweek.com@@JTUqJmQAZFQOKwAA/datedtoc/1999/9905.htm
Why the heir apparent left the catbird seat at
Hewlett-Packard for beleaguered SGI
Sitting in the front row of the company auditorium soon
after his arrival as CEO last January, Silicon Graphics'
Richard E. Belluzzo saw stark evidence of the
problems he had taken on. There to unveil his grand
turnaround plan, he watched as Chief Financial Officer
Steven J. Gomo asked the top 50 execs: ''How many
of you run profit-and-loss centers?'' Most of the hands
shot up. Then Gomo asked: ''How many of you are
profitable?'' The same hands were raised. But when
Gomo asked: ''So who's responsible for all the money
we've been losing?'' not a single hand surfaced.
Belluzzo sat rolling his eyes in amazement.
Rather than running for the exits, though, it was exactly
the kind of Herculean challenge Belluzzo had been
looking for. A working-class kid who had become the
quintessential company man during a 22-year stint at
Hewlett-Packard, Belluzzo felt he had outgrown his
post as HP's No. 2. It was time to take on a job that
would prove his mettle in the toughest of circumstances.
''I had to decide if I wanted to be a career guy or return
a troubled company to glory,'' he says. ''What will Lou
Gerstner be known for--American Express or IBM?''
''SITTING DUCK.'' Belluzzo has gotten just what he
asked for. Today he works up to 17 hours a day trying
to fix one of the worst operations records in techdom:
$450 million in losses over the past 10 quarters
triggered by product delays, production shortfalls, and
a shocking lack of controls. SGI's stock has barely
budged since he arrived, languishing at 15--down 73%
from its high in 1995. Worse, 75% of SGI's $3.1 billion
in sales come from shrinking markets such as Unix
workstations and supercomputers. ''We think they're a
sitting duck,'' says Janice Chaffin, a general manager at
rival Hewlett-Packard Co.'s computer unit.
That's why Belluzzo is overhauling almost every aspect
of the company. Like a one-man wrecking crew, he
has refined SGI's strategy, remade its operating
processes, and tirelessly jetted around the world to
keep nervous customers from bolting. On Jan. 11,
Belluzzo gave customers another reason to stick
around: The Visual Workstation, a Windows NT
machine that carries SGI's trademark slick design and
dazzling graphics--but not its premium pricing. Instead,
he's plunging SGI smack into the rough-and-tumble
business of making high-volume workstations based on
Intel and Microsoft standards. He's betting this will
kick-start revenues and help return SGI to profitability.
On the surface, Belluzzo hardly seems the type to build
billion-dollar businesses. Unlike his well-schooled
peers, his resume shows only an undergraduate
accounting degree from Golden Gate University in San
Francisco. He hates ostentation, preferring family ski
trips to yachts or planes. And last spring he stunned
SGI board members by asking that they scrap a clause
in his contract that guaranteed him $10 million even if
he couldn't lift SGI's shares over the next few years.
''He just didn't feel good that other people had things to
lose and he didn't,'' says SGI board member C.
Richard Kramlich, a venture capitalist.
That's not surprising when you consider Belluzzo's
upbringing. He is the son of a machinist, who was
captured during World War II while serving in the
Italian Army. Belluzzo began working at age 11,
sometimes to help support his family, doing everything
from sweeping floors to picking prunes at orchards
near his boyhood home in Santa Rosa, Calif. ''I had
immigrant parents who worked hard,'' he says. ''I was
just brought up that way, to carry your weight.''
But it was only after his humbling encounter with a
high-school guidance counselor that Belluzzo--then an
overweight, shy, mediocre student--also developed
ambition. The counselor told Belluzzo he wasn't college
material. ''That motivated me to go to school, and do
something more than manual labor,'' he says. Soon
after, he dropped 50 pounds, hit the books, and traded
in a job hauling furniture to sell shoes during his senior
year. ''That was a big deal for me, since it forced me to
deal with people,'' he says. ''It was the start of my
confidence.''
It also was the launching of Belluzzo's career. HP's
printer business was a tiny backwater operation based
in Boise, Idaho, when Belluzzo arrived in 1977. The
young executive quickly made HP's printers easily
available and affordable by lowering manufacturing
costs and by getting them on the shelves of retailers.
Today, the business is a $17 billion empire. ''Rick
always saw the details as well as the bigger picture,''
says HP board member Richard A. Hackborn,
Belluzzo's longtime mentor.
NEVER SAY DIE. True to his blue-collar roots,
Belluzzo credits hard work. ''I was always the hustle
guy,'' he says. His closest friend Terry Copple, a
lawyer, says Belluzzo is ''extremely smart, but he's not
scary smart. What's scary about him is his intensity.''
Copple recalls a recent jog when Belluzzo fell, badly
bloodying his knee but refusing to stop and ruin
Copple's run. ''He wouldn't even slow down.''
Belluzzo has brought that never-say-die approach to
SGI. Within two months of his arrival, he completed a
previously planned spin-off of SGI's MIPS chip
subsidiary and raised $71.6 million by selling a 15%
stake. He sold two of SGI's four factories as part of a
cost-cutting plan to save $200 million in 1999. And he
streamlined SGI's operating structure, replacing a
gaggle of 26 profit-and-loss entities with five product
groups. ''If he can get 95% of what he wants in five
minutes, he'll do that, as opposed to dickering around
for four hours to get 96%,'' says Intel CEO Craig
Barrett.
Indeed, it took Belluzzo less than a day to put to rest
the debate that had paralyzed SGI for half a decade. It
happened last January at Belluzzo's first board meeting
as the CEO. SGI workstation chief Thomas C. Furlong
outlined an existing plan that would put a toE into the
market for machines based on Intel chips and
Microsoft's Windows NT software. Furlong braced
himself for tempers to ignite, but Belluzzo wanted to go
whole hog. ''You're doing exactly the right thing,'' he
told Furlong. ''But let's not just change a piece of the
company. Let's drive those changes across the entire
company.''
Belluzzo is doing just that. He's pounding away at SGI's
freewheeling culture. Engineers, for instance, had long
pursued costly pet projecTs. But after a quick analysis,
Belluzzo axed six of them, including a high-risk effort to
make a gizmo code-named ''NetBook,'' an electronic
book. The moves saved more than $40 million, says
Gomo.
And, just as he did at HP, Belluzzo understands the
importance of spending time with customers. Larry
Smarr, a longtime customer and director of a
supercomputer lab at the University of Illinois, says
former SGI execs criticized him for keeping a database
of customer complaints about the company. But
Belluzzo invited Smarr to meet with him just weeks
after joining SGI, asked to see the data, and
immediately told SGI engineers to work on the
problems.
WORK, WORK. Belluzzo works fast, but not
because he's in a rush to get home. Outside of jogging
and working out a few times a week, he has few
pastimes. It's work, more work, and lots more work.
His friend Coppell recalls an instance a few years ago
when Belluzzo asked him to pull the car over during a
family trip to Disneyland so he could run into the local
CompUSA Inc. to check on printer sales. After he got
back in the car, he fussed for 15 minutes over
something a sales clerk had told him.
Such devotion to HP already was straining Belluzzo's
marriage. His wife, Claudia, had come to resent his
hectic travel schedule and never-ending
responsibilities--especially after he took the No. 2 post
at HP in 1995, friends say. The couple, who have two
teenage boys, are separated, and the divorce should be
final next month. ''Clearly, this lifestyle over multiple
years takes a toll on a relationship,'' says Belluzzo.
Even his mom, Doris, worries about her son's
workaholic ways. While he's clearly enjoying the
challenge of fixing SGI, ''he's gotten much
older-looking,'' she says. ''Sometimes, I think his
success came about too fast. He used to be a lot of fun,
but now it's business, business, business.''
It's just that addiction that may be what the doctor
ordered for SGI. Can Belluzzo return the outfit to its
high-flying days? The Windows NT-based Visual
Workstation is a start. Priced as low as $3,400, the
workstation offers far better graphics than similarly
priced machines and could help reel in SGI's first new
customers in years.
But Belluzzo may also pay a price for seeking growth
the Wintel way. Analysts say only a small percentage of
the Windows NT market--say, computer animators or
special-effects houses--really care about cutting-edge
graphics. ''I don't know of any company that has made
the jump [from proprietary to industry-standard
technology] successfully,'' says Sun Microsystems Inc.
CEO Scott G. McNealy.
The desktop market is only part of Belluzzo's
problems. SGI's future rests primarily on its Unix
servers and supercomputers, which bring in roughly
50% of sales and profit margins twice as fat as the new
NT machines. But since former CEO Edward R.
McCracken purchased Cray Research Inc. in 1995,
sales of Cray's supercomputers have plummeted 40%
annually as customers moved to cheaper machines.
And while SGI's superfast Origin servers are beloved
by customers, SGI remains mired in small markets such
as academia while rivals Sun and HP tap into huge
commercial markets. Merrill Lynch analyst Steven
Milunovich expects SGI will lose $89 million on sales
of nearly $3 billion for fiscal 1999, ending June 30.
Belluzzo's plan: rather than go head to head with
stronger rivals in existing high-end server markets,
leverage SGI's strengths in graphics to create new uses
for these $20,000-plus servers. He has launched a
200-person group that will work closely with
customers in six core industries, including entertainment
and energy. This already has yielded some wins. SGI,
for example, edged out IBM in September when
Pacific Life Insurance Co. opted to spend $3 million on
an Origin 2000 server that turns mind-numbing
spreadsheets into graphics. ''It has a very powerful
capability that no one else has,'' says Pacific Assistant
Vice-President Lisa H. Skinner.
That's the kind of talk Belluzzo hopes to hear from
more customers. He has traveled worldwide,
sometimes embarking on country-a-day swings through
Europe and Asia. That's a pace Belluzzo hopes he
won't have to keep up. ''I don't want to retire and look
back and see that I never took a two-week vacation,''
he says. So he took his two teenage sons scuba diving
in Key West over Thanksgiving break. But ask him
when he's really likely to ease up and he is--per
usual--brutally honest. ''Business is what I know how to
do. It's my strength and my weakness.'' Or rather,
SGI's strength and his weakness.
By Peter Burrows in Mountain View, Calif., with
Andy Reinhardt in San Mateo, Calif., and bureau
reports
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