SGI: Still Hanging Tough - Page 2

Before the Internet, Things Were Very Different

In February 1993, ARPAs Internet was alive and being used by academics and the military but years away from being embraced by business and the general public. There were no user-friendly browsers; Marc Andreessen was still creating his Mosaic GUI browser (eventually to become Netscape) at the University of Illinois. The stable version of the Netscape browser didnt arrive until December 1994.

In early 1993, computers were run on a client/server, local wired network or independent basis only; the great information highway wasnt yet in place to connect them. Cisco Systems Inc., Sun Microsystems Inc. and other companies were scrambling to put these connections in place, to try and convince people that the network was the future.

During this pioneering scramble for the new, network-based IT that would eventually morph into the Internet we have today, SGI stayed the course. It was doing good business, producing high-end, 64-bit Iris-branded workstations (with the Unix-based Irix operating system). The systems sold for $10,000 to $20,000 (and higher). Quality was the key, and price was no object for companies that had the money to invest.

The company had a reputation for providing the finest, highest-resolution computer graphics in the industry. This is the company that pioneered 3-D graphics technology and still is the recognized leader in that segment today.

Clinton and Gore Come Knocking

Fresh off their victory, Bill Clinton and Al Gore made an early joint post-election appearance on Feb. 22, 1993. Air Force One and Two landed at Moffett Field Naval Air Station here, and the two men took the short drive over to Shoreline Blvd. to visit the hottest company around: Silicon Graphics.

The occasion? To do some cheerleading and let the Silicon Valley—and the world—know that Washington was going to support R&D in the information technology business with all the tax-advantage spending muscle it could muster. Then-CEO Ed McCracken of SGI took the stage with the nations chief executives, basked in the glare of the television cameras, and did his part to provide sound bites for the media.

SGI, the computer graphics leader, was on top of the world. But just two and a half years later, following the acquisition of Cray Research Inc., SGIs stock started a slide that has resulted in Mondays action by the NYSE.

SGI, started in 1980 and incorporated in 1982, was founded by Jim Clark (who later founded Netscape) and a group of seven others. It originally focused on making applications-oriented silicon chips. The Defense Advanced Research Projects Agency (DARPA) "geometry engine" led to SGIs focus in 1983 on being a computer terminal company. In 1984, when McCracken became CEO, that focus was shifted to workstations, and in 1986 the company went public.

SGI products in 1986 focused on the desktop. In 1988, SGI introduced the Power Series servers, which became the Challenge line in the 1990s. In 1992, the company shipped its 100,000th workstation, and it reported $1 billion in revenue in 1993. Steven Spielbergs movie hit, "Jurassic Park," was released, having been rendered on SGI workstations. The Disney/Pixars landmark "Toy Story," also made with SGI machines, was in the works, to be released in 1995.

SGI did everything itself, from designing and building the software and hardware, to custom-designing the chips. It even had a subsidiary that made its own custom glass for its 3-D workstation screens.

But following the Cray merger, engineered largely by McCracken, the stock price began to slip. The company found it couldnt compete with the newer, faster Windows NT-based and Sun Solaris workstations coming on the market, and the powerful Cray supercomputers couldnt be sold to just anybody. Competition from a horde of heavyweights selling less-expensive, ever-more powerful computers, such as IBM, Sun, Hewlett-Packard Co. and Compaq, proved too much to overcome.

"PCs were still toys in 1995," Gartenberg said, "especially compared to the high-end machines SGI was building. The company also didnt foresee that PCs would get as fast as they did as quickly as they did. SGI basically ignored Moores Law."

It proved a conundrum for SGI.

"Were were going to build the worlds fastest NT server," longtime SGI executive Greg Estes told Ziff Davis Internet, "and use our own chip set and graphics apps in it. But these became a commodity so quickly—who knew? We would have been the fastest for a couple of weeks, then second fastest, then third two weeks later. And there we would have been, with our proprietary chip sets soldered onto to the board, not able to compete."

Next Page: SGI overlooked key trends.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...