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

To: Alexis Cousein who wrote (5986)	4/1/1999 3:36:00 PM
From: Adam Nash	Respond to of 14451

Points well taken. However, I'm looking at the problem SGI faces from a higher level: SGI faces high competition in a low-unit, high ASP market (Unix graphics workstations). This market also happens to be fairly stagnant, with growth coming from stealing share. SGI is not doing the best job competing with Sun and HP here, and this is their stronghold. To solve this problem, they decided to go with an x86/NT based solution that would hopefully increase units sales to make up for the low ASPs and margins. The problem is by setting this as their long-term direction, it undermines their credibility in the Unix workstation market (which Sun has been taking advantage of) and exposes them to a large transition risk. I think SGI can/could have pulled it off, but looking at the progress to date, I don't think they have yet demonstrated the capability to delivery a high-unit NT machine. That means for the forseeable future you can expect sales to decline. As long as sales are dropping, it is hard to bring expenses down to the point where you are profitable. Right now, I am worried that SGI sales may eventually dip below $2B.