Silicon Graphics: Visualizing success

SGI sees improved performance in focused approach

By Martha Richards -- Movers & Shakers, 8/15/2002

SGI, also known as Silicon Graphics Inc, is getting back to basics. On its 20th anniversary, the company has come full circle. After several rounds of restructuring and under the leadership of CEO Bob Bishop, SGI is sharpening its focus and concentrating on its core competencies: high-performance computing, complex data management, and visualization products and services geared toward technical and creative users. By capitalizing on growing markets and continuing to drive new products into the marketplace, SGI is banking on a successful future.

“We will be the global leader in bringing visualization into most technology and scientific breakthroughs throughout the 21st century.” Bob Bishop, CEO, SGI

Since accepting the position of CEO in 1999, after the abrupt resignation of Richard Belluzzo, Bishop has had his work cut out for him. No stranger to the company, Bishop had been an employee since 1986, and has served as president of SGI’s World Trade Corporation, as a member of the board of directors, and as an active member of the senior management team. The challenges he has had to face as CEO, however, have proved to be the most daunting. Bishop says the most challenging task has been stabilizing the company and getting positive cash flow.

While the company flourished in the late ‘80s and early ‘90s, and was recognized as a leader in high-end graphics computers, the late ‘90s were a different story. SGI’s troubles led to losses of $460 million in fiscal 1998, $830 million in 2000, and $493 million in 2001. Some blame the company’s hardships on an attempt to expand into new markets. “We got defocused at the end of the ‘90s,” Bishop says. It has been Bishop’s mission to bring the company back to its roots. This has involved some paring down—selling the Cray supercomputer business, spinning off the MIPS Technologies microprocessor business, and shedding two software operations. Through March 29, the end of the third quarter of SGI’s fiscal year, the company reported revenue of $685 million and a loss of $82 million.

SGI now concentrates on five specific market segments: government and defense, energy, the sciences, media, and manufacturing. As diverse as these markets may seem, SGI recognizes a commonality in its customers. The company addresses the need that technical and creative users in these markets have to understand vast amounts of data and then visualize them in a realistic time frame. As Bishop puts it, “Our machines accelerate insight.”

From the NASA Ames Research Center to the University of Toronto’s Hospital for Sick Children, SGI’s diverse customer base uses the company’s products for a wide variety of applications. Most famously, Hollywood has used SGI’s powerful graphics systems to create cutting-edge special effects in such recent blockbusters as Pearl Harbor, Lord of the Rings, and Shrek. Companies like Ford use SGI technology to solve complicated design problems and build safer cars.

In general, the media and manufacturing markets are feeling the pressures of today’s economy, but Bishop indicates that the company is seeing growth in government and defense, energy, and the sciences. “Our focus on these three sectors is No. 1,” Bishop says, underlining the company’s growth strategy moving forward.

The government and defense sector, including homeland security, has grown considerably, comprising 30 percent of the company’s total business this year. The company attributes this to the longstanding relationships it has built with US defense labs and systems integrators over the years. SGI’s cutting-edge technology is involved in such areas as battlefield visualization, allowing today’s troops to practice on realistic models. SGI technology also plays a role in such areas as command and control, surveillance and intelligence, and mission preparation.

The other priority in SGI’s growth strategy is to continue to develop and drive new products into the marketplace. Research and development is crucial to meeting this objective, and the company invests 10 to 15 percent of its annual revenue here. The company recently launched its Visual Area Networking concept, an architecture that allows users to interact with visualization supercomputers from remote locations and to work collaboratively with other teams or individuals. The first implementations of this concept are underway, and Bishop is confident that it will propel SGI ahead into the future.

With confidence in its products and a renewed focus, SGI plans on not looking back, but moving forward full steam ahead. “Our intention is to grow, be profitable, and highly focused,” Bishop says. Maybe it is faith in the company’s products, which for the past 20 years have been helping technical and creative users make advances in many fields, that powers Bishop’s optimism regarding SGI’s place in the future. “We will be the global leader in bringing visualization into most technology and scientific breakthroughs throughout the 21st century,” he says.