SGI names HP executive as CEO

Silicon Graphics (SGI) new chairman and chief executive is described as a strong performing steady Eddie, but analysts question whether he can equally carry the role as a turnaround king.

As previously reported by CNET's NEWS.COM, Richard E. Belluzzo, former general manager of Hewlett-Packard's computer products organization, was named today as SGI's new chief executive officer and chairman.

Investors cheered SGI's choice, pushing the graphics workstation maker's stock up more

Richard E. Belluzzo

than 22.2 percent to close at 13-3/4 today, up 2-1/2 points over yesterday. The stock, which has been lagging since its high of around $30 a share in April, had 5.5 million shares trading hands today--more than three times the average daily trading volume.

"HP has done well under [Belluzzo's] tutelage," said George Elling, an analyst with Lehman Bros. "He is probably a very good man for the job, but this is a company where it's questionable that it can be effectively turned around and put in a growth mode."

Louis Mazzucchelli Jr., an analyst at Gerard Klauer Mattison, held a similar view.

"He's the right guy, but can anyone turn SGI around? I don't know," Mazzucchelli said. "They are reworking themselves into a [Windows NT] company and coming up with lower-priced workstations. Those are all things that Belluzzo has done at HP."

Belluzzo brings to the table experience in overseeing a $35 billion computer products organization that focuses on computer systems and computer products, as well as software and services. HP's software and services group represented 83 percent of the company's overall sales of $42.9 billion last year.

The computer system group oversaw workstations, large-scale computer systems, and consulting. This should bode well for SGI, a high-end workstation and server maker that has encountered rocky times of late in pushing its server sales forward, getting its production on track, and staving off a competitive onslaught from Windows-Intel workstations as it grapples with adding Windows NT to its offerings.

"As one of the key architects of HP's success, Rick Belluzzo is a proven leader in the computer industry," James A. McDivitt, a Silicon Graphics board member who led the search, said in a statement. "His more than 20 years of big-league technology management experience, strong operating and marketing skills, in-depth knowledge of the computer business, and relationships with key executives throughout the industry make Rick an outstanding choice to build on Silicon Graphics' technology leadership."

Belluzzo said the challenge of a turnaround situation was what attracted him to the job. He added that his position at HP, particularly during the past year, involved instituting numerous changes, among them reorganizing the computer group's business models, handling a $1.29 billion acquisition of e-commerce company VeriFone, and launching an Internet game plan.

"It had all the same characteristics that you need in a turnaround," Belluzzo said. "It required leadership and change."

Today was only Belluzzo's first day on the CEO job at SGI, but already he had made a list of the top three tasks he intended to tackle. First on his list is filling the chief financial officer and top marketing positions, second is accelerating the time it takes to bring SGI products to market and, lastly, identifying the issues that will be on his next list of problems to resolve.

One such issue will be aiding SGI's transformation going forward. Mazzucchelli said that Belluzzo has been "battle-tested" in terms of fighting competition and changing a Unix company into one that serves up NT, skills that will translate to his new role.

"HP was the first to embrace NT and said that Unix and NT could coexist," Belluzzo said. "I plan to take that to SGI and be successful."

That move will push SGI further into competition against HP, which historically had been in the area of high-end servers and workstations.

Belluzzo replaced Edward McCracken, who in October announced that he would step down once his replacement was named. McCracken has run SGI for more than 13 years, one of only a handful of tech CEOs with such a long history at a single company. McCracken will serve as a consultant to SGI through June 30.

"With Silicon Graphics poised to take its core strengths into much larger markets, Rick's experience and leadership will be a significant asset," McCracken said in a statement. "I'm pleased that he's decided to join the company and am optimistic that the future holds great opportunity for Silicon Graphics."

When SGI initiated its search for McCracken's successor, the company already knew Belluzzo was its first choice, even though other candidates were entertained, a source familiar with the search said.

Brian Eisenbarth, an analyst with San Francisco-based Collins & Company, previously had said that any replacement for McCracken would face some tough issues, such as heavy competition and pricing pressure, in addition to the need to curb costs and improve the company's image so that all of its product offerings, not just workstations, will be recognized in the marketplace.

SGI yesterday reported a second-quarter loss of $31 million, largely due to a restructuring charge, and flat year-over-year revenue growth for two quarters in a row. The company's revenues reached $851 million.

"Silicon Graphics is an exciting company in a rapidly growing industry," Belluzzo said in a statement. "The company is well-positioned with superb technology, a respected brand, powerful capabilities in visualization and high-performance computing, a strong product line soon to span Windows NT as well as UNIX, a large installed customer base, and talented employees...I'm confident I can provide the leadership to help Silicon Graphics improve its performance and achieve its extraordinary potential in the years ahead."

In naming Belluzzo as CEO, SGI is repeating history. McCracken also joined SGI from HP, where he helped launch HP's first commercial line, the HP 3000.

Belluzzo, who joined HP in 1975, initially worked in the accounting department, was later appointed as controller for the former Information Products Group, and in 1986 was named marketing manager for the former Peripherals Group.

In 1993 Belluzzo was promoted to general manager of HP's Computer Products Organization. Two years later he was elected a senior vice president. Later that same year he assumed management responsibility for the newly formed Computer Organization and was named an executive vice president.

How long will it take to gauge Belluzzo's turnaround capabilities?

"A tone should develop in three to six months," Mazzucchelli said.