As SGI fights to stay alive, users hope for the best

'It's business as usual,' says CEO Dennis McKenna

Despite filing for bankruptcy this week, Silicon Graphics Inc. officials said that users will get their products, service and support without change even as new product plans will move ahead. That message is an attempt to soothe worried users who rely on the Mountain View, Calif.-based company's high-performance computing technology.

SGI CEO and Chairman Dennis McKenna has been telling customers that he has a strategy for the company since taking his job in February. Earlier this year, McKenna restructured the company, laying off 12%, or about 250 employees, and installing some new managers. Then came the decision, announced on Monday, to seek Chapter 11 bankruptcy protection. That move won initial approval in court yesterday, ensuring that the company will have $70 million to continue day-to-day operations while it reorganizes.

"We are pleased with the approval of our 'first-day motions' by the Bankruptcy Court," said McKenna in a statement. "This approval will enable SGI to operate globally and meet normal business obligations."

In an interview, he said no additional cuts are planned and asserted that the Chapter 11 move would not disrupt SGI'soperations. "It's business as usual and we will continue to reinforce that," McKenna said, adding that the company is moving ahead with plans to broaden its enterprise reach through the introduction of x86 servers, as well blades running Intel's Montecito Itanium dual core chip. New products are due beginning next month (see Q&A: "SGI CEO sees path out of bankruptcy with x86 products").

Analysts have repeatedly blamed competition from low-cost x86 vendors running Linux for SGI's plight, but the company's visualization technology and shared memory architecture have proponents. The National Aeronautics and Space Administration is using an SGI Altix supercluster named Columbia, in honor of the space shuttle astronauts, that's made up of 10,240 Itanium 2 processors. The system became fully operational in the fall of 2004.

Walt Brooks, who until recently was chief of the NASA Advanced Supercomputing Division and is still with the space agency, said,in an e-mail that the ability to configure large single system images with high bandwidth and low latency "is extremely advantageous for a number of our codes in terms of scaling and the ease of programming and diagnostics." Brooks also heads the SGI user group, which is meeting next month in Las Vegas.

SGI's Numaflex technology, a shared-memory architecture that allows memory to be shared across multiple processors and the large Intel Itanium cache, is "the key to the effectiveness of the Columbia Constellation design," he said. "There are other options out there for both capacity and capability computing, but overall the community would lose a major option in designing their computer centers if SGI failed to regain its footing."

SGI systems make up nearly half of the 3,000 CPUs available at the U.K.'s University of Manchester Research Computing center, according to Terry Hewitt, its director.

Hewitt met with McKenna soon after he took over at SGI. "He has a good understanding of the product range," said Hewitt. "I was very impressed with his competency."

As for the bankruptcy filing, Hewitt said he is concerned -- and wants more details from the company. But "there's nothing to panic about. The new CEO has put in changes that should make the difference and he needs some time for those to take full effect."

Brian Ropers-Huilman, director of High Performance Computing at Louisiana State University in Baton Rouge, is concerned about specialized support needs available only through the company. The school purchased an SGI system, a Prism Extreme visualization system with 32 processors, about a year ago.

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

For SGI, the most recent fiscal quarter was not kind. Revenue for the three months ending March 31 was $108 million, down from revenues of $159 million in the same quarter a year ago. The company posted a net loss of $43 million in the just-completed quarter, but the bankruptcy filing eliminates some of the company's debt.

Copyright © 2006 IDG Communications, Inc.

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