SGI’s CEO: Bankruptcy “Positive Event”

Those of you who have been in the industry for a while will know that Silicon Graphics (SGI) was once a darling of Silicon Valley, the vendor of choice for graphics-intensive technical workstations and servers. It was the Rolls-Royce of computer hardware for visual simulations.

Like Rolls-Royce, however, SGI has seen better days. It’s current chairman and CEO, Dennis McKenna, is now on record saying that the company’s filing of Chapter 11 bankruptcy protection in early May was a "positive event."

I suppose when one is handed lemons, one makes lemonade, and Silicon Graphics, if it can renegotiate its debilitating debt load and creatively milk revenues from its legacy technologies, might survive or subsist for a for more years.

Surely, though, Mr. McKenna must know that SGI will never return to its place in the pantheon of technology titans, just as Silicon Valley itself will never again dominate the world of information technology the way it did during the delirious 90s. Those days are gone forever, and there’s no point denying reality, which has an uncanny knack of impinging on our delusions.

No matter what Mr. McKenna says, the best of SGI’s employees already have bolted for the exit doors and the majority of its formerly loyal customers heard the death rattle and sought solutions elsewhere. Enormous damage has been done to SGI’s brand and its credibility, and ambitious plans to dig out of the rubble of bankruptcy won’t reclaim SGI’s sprawling campus headquarters in Mountain View, Calif., or its status as a market leader.

SGI’s former campus is now part of the Googleplex, sold recently to Google for $319 million, which will be used to defray SGI’s prodigious debts. What’s more, in what is perhaps a climactic admission of strategic bankruptcy, SGI’s plan to generate new revenue seems to revolve around lawyers rather than engineers. Yes, it’s following the dubious lead of SCO Group and preparing to unleash the well-educated dogs of litigation on any and all parties who might be infringing on the intellectual-property rights associated with SGI’s software visualization, collaborative decision-making tools, and even flat-panel display technology.

It’s a reach, but apparently that’s all SGI has left in its arsenal.

How did it get to this point? While McKenna points to a series of clearly poorly conceived and dreadfully executed acquisitions during the 90s, I believe SGI ultimately was victimized by its inability to see the impending commoditization of visual computing as represented by industry-standard Intel-based microprocessors and the Windows operating system. It was the Innovator’s Dilemma, before it was called that.

In that sense, perhaps SGI’s decline and fall, while unquestionably sad, was also inevitable. Forces were at play — economic and technological — that were impossible to resist. Then again, resistance probably wasn’t the best course. By the time SGI adjusted its strategy to go with the inexorable flow, it was too late. 


3 responses to “SGI’s CEO: Bankruptcy “Positive Event”

  1. I used to work at SGI, and I’m sorry to report they’ve gone under as of April 1st, 2009.

    This is indeed a sad day.

  2. William,

    Yes, it was a sad day. As the saying goes, SGI used to be somebody.

    There are many reasons for the company’s fall from grace, some relating to industry dynamics (increased capabilities and lower costs of Wintel graphics workstations), and some having to do with executive missteps.

    Still, SGI, as you would know, drove the first big wave of meaningful graphical computing and compute-intensive visualization. It should be remembered for its contributions.

  3. Brad:

    One of the things I fondly remember about working for SGI was the fact that, despite the crazy hours and the ridiculous workloads (we often put in 16 hour days) is that SGI really appreciated and took care of its people – something they went out of their way to make sure you never forgot.

    Case in point: every Friday afternoon we’d have something called a Beer Bust. Basically, they’d drag out some kiddie pools, fill ’em up with ice and load ’em up with A LOT of beer.

    So we’d march over to Building 10 (I worked in Building 11, IMSD, Challenge/Onyx Line), get some great food, knock back about 7-8 beers and then go back to work.

    As crazy as it was working there, it was the most fun I ever had. I can’t say that about any job I’ve held since.

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