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SGI CEO: x86 products to remedy bankruptcy

11.05.2006
Silicon Graphics Inc. (SGI), which produces some of the world's largest supercomputers, filed for Chapter 11 bankruptcy protection this week. The company's high performance systems, which in recent years have been largely based on Itanium processors, have been long used for visualization work in the entertainment, automotive and aerospace industries, among others, as well as by governments. SGI, however, has been under intense competition from low-cost x86 clusters -- competition that has had an impact on the company. But CEO Dennis McKenna in an interview with Computerworld said the Chapter 11 move will allow SGI to eliminate debt and expand its business, in part, by offering x86-based systems next month.

Excerpts from the interview follow:

Why did you file for Chapter 11? The company had accumulated legacy costs over the years and as we explored options to fix those issues ... this became the option that could provide the quickest and best relief in order for the company to move forward with its new business model.

Have you started speaking to your customers about it and addressing their concerns? We have. We have been very active globally with our customers, suppliers and partners, and the response has been overwhelmingly supportive of the action. We gave them an explanation about what it means for the welfare of the company and its ability to move forward and to support them in the short term and longer term as a continued supplier and developer of next generation platforms. The one clear message is we're glad that there is a level of certainty on the future of SGI. It's been that uncertainty that has really had an impact, despite having a new management team and strategies. The financial overhang was something that had to be removed in order for us to be successful in driving those new plans.

What's the basis for this level of certainty? You've gone through a number of cutbacks, you had a 12% layoff in March and you are under intense competition from the x86 supercomputing Linux vendors. Where does this come from? We have a new management team in place. We have realigned our organization and the metrics to improve our ability to execute, to achieve those top-line growth strategies. We've defined a new business model and we removed legacy cost structures in the company. And we have a balance sheet that will be fixed through this process. This is a stable foundation for us to move forward; the company has not had that for some time.

How are we going to compete in the marketplace successfully? One, we believe that we are uniquely qualified to address a growing challenge of dynamic complex data and being able to access it, analyze it and transform it -- and that statement in itself is the opportunity for SGI. The implication to that is we have the ability to expand our addressable marketplace, and that's exactly what we are doing. We are taking three paths to doing that. The first is within our existing marketplaces. The company has over 6,000 active customers. These customers have SGI products and services, they like our products, they want us to be successful, and we can do a better job just within that customer base. We have done a not-so-stellar job in bundling the solutions that we've done for many customers within the verticals that we participate in. We are doing a better job now in putting together solution sets across our verticals that are much more efficient from a price/performance standpoint and in getting that message out into the marketplace.