Users Hope for the Best as SGI Tries to Right Itself

CEO says it will be 'business as usual' for vendor despite bankruptcy filing

Despite its filing for bankruptcy protection last week, Silicon Graphics Inc. said that it will continue to provide systems, service and support to users without any change and that it is moving ahead with its new-product plans.

That message was an attempt by SGI officials to soothe users who rely on the company's high-performance computing technology. For example, SGI systems account for nearly half of the 3,000 CPUs available for use at the University of Manchester's research computing center in England, according to its director, Terry Hewitt.

Hewitt said he's concerned about the bankruptcy filing and wants more details from SGI about its finances and reorganization plan. But "there's nothing to panic about," he said, adding that SGI's new chairman and CEO, Dennis McKenna, "has put in changes that should make the difference, and he needs some time for those to take full effect."

McKenna took over as head of SGI in February, and Hewitt met with him soon afterward. "He has a good understanding of the product [line]," Hewitt said. "I was very impressed with his competency."

Louisiana State University in Baton Rouge purchased a 32-processor configuration of SGI's Linux-based Prism Extreme visualization system last year. "Obviously, I'm going to have concerns over future support," Brian Ropers-Huilman, the school's director of high-performance computing, said last week. The Prism system has specialized support needs that are available only through SGI itself, he said.

But, Ropers-Huilman added, "I don't feel that they are going to flat-out abandon their customers at this point. I have to believe that they are going to have a [viable] strategy."

Indeed, McKenna has been telling users since February that he has a strategy for SGI. Earlier this year, he restructured the Mountain View, Calif.-based company, laying off about 250 employees -- 12% of its workforce -- and installing some new executives. Then came the decision, announced last Monday, to seek Chapter 11 bankruptcy protection as part of a reorganization plan that SGI agreed to with its senior lenders and debt holders.

On Wednesday, a U.S. Bankruptcy Court judge in New York gave SGI initial approval to use $70 million in financing provided by a group of its bondholders to fund ongoing day-to-day operations during the migration process.

In an interview, McKenna said that no additional cutbacks are planned, and he asserted that the Chapter 11 filing won't disrupt SGI's operations.

"It's business as usual, and we will continue to reinforce that," he said, adding that SGI is moving ahead with plans to broaden its enterprise reach through the introduction of x86-based servers as well as blades running Intel Corp.'s Montecito dual-core processor. The new products will begin arriving next month, according to McKenna.

Analysts have blamed competition from low-cost x86 systems running Linux for SGI's financial plight. The company last week reported preliminary results for its third quarter, which ended March 31, saying that revenue totaled $108 million -- down from $159 million in the same quarter a year earlier. It posted a preliminary net loss of $43 million.

NASA is using an SGI Altix supercomputer cluster with 10,240 Itanium 2 processors.

Walt Brooks, who until recently was chief of the NASA Advanced Supercomputing division and still works at the agency, said via e-mail that SGI's NUMAflex shared-memory architecture is "the key to the effectiveness" of the cluster's design.

"There are other options out there for both capacity and capability computing, but overall, the [research] community would lose a major option in designing their computer centers if SGI failed to regain its footing," wrote Brooks, who also heads the SGI User Group. The group is scheduled to hold its annual conference next month in Las Vegas.

New Chapter
SGI said its reorganization plan will reduce its debts by $250 million.
The company expects to emerge from Chapter 11 protection within six months.
Its subsidiaries outside the U.S. will continue to operate without court supervision.
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