Silicon Graphics CEO Rallies For Comeback

Welcome Guest. | Log In| Register | Membership Benefits

January 04, 1999 (12:00 AM EST)

By Joe Wilcox,

Closing out his first year on the job, Silicon Graphics Inc. CEO Rick Belluzzo is rallying the troops and the industry for what SGI hopes will be a big comeback.

The company will start by launching its highly touted, long-anticipated Windows NT workstation on Jan. 11. CRN section editor Joe Wilcox recently spoke with Belluzzo about his first year on the job, the new workstation, and SGI's future.

As you reflect on your first year at SGI, how are you feeling about where things are compared with when you started?

We stepped back and looked at where we were and tried to develop a plan. We said we had a 12-to-18-month transition we had to go through, and we're halfway through that plan. During the last number of quarters, we reduced our expense structure, we've redone our product road map, we divested some businesses, we defined product direction, marketing direction, industry direction, and a whole range of things, and we changed the organization around that.

The big focus has been execution, and a big part of that has been the introduction of the NT workstation, which is a fundamental part of getting our growth rate back, and basically fulfilling our strategic imperative, which we feel is to take our contribution in technology and take it to the mainstream of the marketplace much more effectively than we have.

Our biggest focus right now is growth and profitability, growth through new products, growth through focusing on servers, then graphics, and continuing to reduce our cost structure and achieve profitability by the end of this fiscal year [June 30].

There has been a lot of speculation you would help SGI move from niche markets and commoditize its products. Is that happening?

Belluzzo: We're definitely working in that direction. One of the big changes we're making with the NT workstation, the Visual Workstation as we call it, is to take our graphics systems technology to the mainstream of the marketplace. That is actively what we are doing right now. We're going to do that at the desktop and in the systems area. We take our core technology, our capability, and take it to the mainstream of the marketplace. This is what we haven't done for the last several years, which is why we have growth problems today.

Are there any particular areas in the mainstream market you are interested in?

First of all, I wanted to say we are not abandoning our core market of technical computing. In addition to technical computing, we are moving into areas like strategic business analysis, Internet data centers, digital media, and storage. We're changing our workstation line with the Visual Workstation and moving into lower-priced markets where we have not participated in the past. So we are definitely expanding our market presence with the introduction of these products and the marketing programs we have in place.

How important is the new workstation, even in convincing people SGI is on the turnaround?

This product is important for several reasons. First of all, it's going to allow us to grow our revenue. The Unix workstation market has been in decline for several years, and that has represented a significant part of our business. So we tended to struggle with growth because of that factor. We now will reach a broader market and grow our business.

Secondly, it shows the strategic imperative of taking our technology and delivering it at lowering price points. This is the first step in that effort. So in that sense, it's very symbolic of what we want people to know about the new SGI.

And thirdly, something that's a little soft but really important, it really will represent one of the most significant announcements in the history of our company. It's a very exciting product. It's very well-received. It will redefine the marketplace, so that will create a lot of energy, enthusiasm, and excitement around the company.

Some argue the NT marketspace is too crowded. What have you done to try and differentiate the workstation from competitors' products?

I've been in the PC space for a lot of years, and the market is in desperate need of products that are not beige, vanilla products that all act the same. This product is different. It's different in terms of performance. We have unique system architecture we built around this product that will deliver breakthrough performance. It's different in terms of graphics. We've added our graphics technology to deliver better performance and better quality. We've also added digital media capabilities to be able to make this product for creative professionals.

We didn't just stick cards in the back of this thing. We decided right from the very beginning for it to really be a product that delivers performance and delivers leadership. What will be very different is we'll be doing this at PC price points running NT applications. We're delivering the dream people have, which is the attributes of a PC, meaning the applications and the prices, with the performance characteristics of workstations.

Is it fair to say you are leveraging your strength in digital media to commodity markets?

I don't like the word "commodity." I like to think of it as the mainstream commodity market. But everything we do around the commodity [and] around the technological innovation we have, we have to be more relevant. We have to make it more central in the industry. We have to deliver it to more customers. In that sense, you can expect that from every contribution we have made or will make in the future.

What role will the channel play in reaching customers?

The channel will become increasingly important to our company. We really feel to deliver this product at large, to the mainstream market, we will need a very well-developed group of resellers that can take the value, take the products, and reach a larger segment of the market. So you will see a different channel approach, one that is more aggressive and one that has more breadth to it and one that makes the channel more central in our desktop products.

Will the same apply to servers?

Eventually, I think that will be true. Today, our server business is very high-end, very unique, very technical, and Unix-focused. It hasn't always been broadly received by the channel even though we have many reseller and integration partners for our server business. But for our server business to become more reseller-focused, we need different products. We will address that over time.

So you are then restricting your new reseller focus to the desktop?

Well, we need resellers everywhere, but the more aggressive new push will definitely be at the desktop.

Are there three things crucial to your becoming profitable by the end of your fiscal year?

The first one is to be more aggressive in building our server high-end graphics business. The second is to rejuvenate our desktop market with the Visual Workstation. And thirdly, continue to improve our business model and focus on reducing on our expense structure, and allowing ourselves to function in a lower gross-margin environment.

Do you plan to bring some of your supercomputing experience into the NT space?

We are focused on a different market space than, say, Sun [Microsystems]. Sun is primarily focused on enterprise traditional applications. We are focused on what we learned in technical computing and applying that to new application types like strategic business analysis, the Internet, media, and some of these other business areas.

We are focused on a different set of trade-offs, a different set of problems, and a different set of solutions. We are trying to position ourselves for where the market is going and to build leadership in certain application areas. Certainly, a big part of our strategy is to redefine what people think about supercomputing, making supercomputing pervasive, and taking the technology and expertise we have at the high end and cram it and apply it to our Origin and server line. In doing so, we think we can develop a rich product line and pursue these new applications very effectively.

Does that product line include NT servers?

We'll always consider that, but our strategy is more agnostic when it comes to operating systems. We will continue to drive Irix, but if other operating systems can deliver the value proposition, and we want it delivered around performance, applications and scalability, we will consider that.

Do you have any Linux plans?

Linux is increasingly important. I can't go on a customer visit without somebody asking about Linux. Basically, people want the robustness of Unix, but they want a more vendor approach to it. We will look at it, and I believe we will have some announcements about that in the future.