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SGI to slash workstation prices

SGI will discount Octane models by as much as $15,000 to harmonize its Unix-based systems with planned Windows NT products.

    Silicon Graphics is set to slash prices by 36 percent on its midrange line of workstations, as the company seeks to halt sliding sales while it puts the finishing touches on systems based on Intel processors and Microsoft's Windows NT.

    On August 1, SGI will cut the price on its Octane series by as much as $15,000 to harmonize its traditional Unix-based systems with new Windows NT products expected by the fourth quarter. The price drops will be part of a series of announcements to be made tomorrow, according to the Mountain View, California, company.

    The Octane line's entry-level product, which comes with a 225-MHz R10000 MIPS processor, 128MB of memory, a 4GB hard drive, and a 20-inch monitor, will fall to $17,995 from $19,995. The pricing action comes two months after the company introduced it.

    An Octane system featuring 250-MHz R10000 processor, meanwhile, will drop from $38,995 to $24,995.

    Generally much less expensive, workstations based on Intel processors and the Microsoft's Windows NT have been making market share inroads at the expense of MIPS and Unix-based systems. Sales of Unix workstations were essentially flat last year, but NT sales zoomed.

    In the first quarter, Hewlett-Packard, which sells both kinds of workstations, surpassed for the first time Sun Microsystems, which sells only Unix systems, although Sun still led in Unix sales. Meanwhile, SGI has been under pressure from Compaq, Dell, and other low-cost vendors.

    Struggling to keep up in both the server and workstation markets, SGI has posted three consecutive quarterly losses. In January, however, the company named Rick Belluzzo as CEO, effectively committing the company to Intel-based products. The price cuts are essentially an attempt to level the price-performance structure of SGI's Unix and forthcoming NT lines, said Dataquest analyst Dan Dolan.

    "They have to make sure Unix products are priced relatively close," he said.

    In addition to price cuts, SGI is "looking to outsource manufacturing to gain the economies of scale of PC manufacturing," Dolan noted.

    Besides adopting the Intel architecture, SGI will make one of its last major releases of the MIPS processor for servers and workstations next year, according to sources. SGI will continue to boost processor speeds and incorporate the chip in its high-end computers, but will likely start the phasing out the MIPS architecture in 2001 as 64-bit chips from Intel become more pervasive and powerful.

    Last month the company spun off MIPS Technologies, which designs and licenses MIPS microprocessors for handheld computers and other such information devices.

    Also tomorrow, SGI will announce that its entry-level O2 line will incorporate the 225-MHz R10000 processor, a speed upgrade from the 195-MHz version of the MIPS chip. The price will remain $10,495.

    SGI will further cut the price of its Onyx2 Reality supercomputer with two 250-MHz R10000 processors by 45 percent, to $75,000.