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Details of SGI's Windows NT workstations emerging

Set to offer systems starting below $4,000, Silicon Graphics hopes the major strategic shift will propel its turnaround.

As Silicon Graphics prepares to realign its mainstay workstation business around the Windows-Intel architecture, new details about the company's major strategic shift are emerging.

The Mountain View, California, company's turnaround could hinge on acceptance of the new Visual Workstation systems, which are SGI's first products to use the Microsoft Windows NT operating system and Intel processors. To date, SGI systems have used an in-house version of the Unix operating system and internally developed processors based on the MIPS design.

The new Visual Workstation 320 will be priced starting below $4,000 and offered with up to two 400-MHz Intel Pentium II processors, while the top-line 540 model will ship with up to four Intel Xeon processors, priced starting at $6,000.

The new systems will be introduced this coming January, according to a company spokesperson, who declined to provide further details of the announcement except that a number of key industry executives will be on hand for the rollout.

"They've put a lot of money in these products and [SGI] is expecting them to do well for the company," said Keren Seymour, senior workstation analyst with International Data Corporation.

That said, Seymour doesn't expect the systems to significantly boost SGI's bottom line in their first year because the company has to adopt a new business model based on lower profit margins. Workstations have historically sold at prices that are often over $10,000, or even above $20,000 at the high end. But Windows-Intel workstations are typically priced below $10,000 since they bring the economies of scale of the personal computer industry to the workstation world.

SGI has already given sneak previews of the systems. The systems were demonstrated at Comdex in Las Vegas last month and at the Digital Content Creation conference in Los Angeles last week, where graphics technology analyst Jon Peddie, president of Jon Peddie Associates, encountered the machines.

"SGI demonstrated the workstations loading a 50-megabyte image in a few seconds [and overlaying] special effects on live video feeds," according to Peddie. The significance of the demonstrations is that Peddie estimates SGI's new workstations will be as fast or faster than any currently available high-end NT workstation.

More important, these technologies are "very price competitive. This definitely puts SGI back in a [technology] leadership position," Peddie believes.

But SGI will have to contend with the likes of Compaq, IBM, Dell Computer, and Hewlett-Packard (HP). Compaq, IBM, and HP have all been offering Windows-Intel workstations for at least two years already.

Industry analysts also anticipate that SGI will offer its graphics technology as a high-performance add-in circuit board for PC makers with AGP-ready systems by the end of the year. SGI, however, would not confirm this. AGP is a 3D graphics technology now prevalent in PCs and workstations from Compaq, HP, and others.

This would put SGI in competition with another set of companies in the graphics chip business, including Intergraph (which sells both workstations and graphics cards) and Evans & Sutherland, but would allow SGI to gain new sources of revenue in the rapidly growing NT workstation market even if users aren't buying SGI's own workstations.

SGI originally planned to start selling Xeon-based workstations this year, but a glitch forced a delay until January 1999. Specifically, SGI encountered difficulties getting the Xeon chips to work properly in the systems.

In the meantime, "a lot of low-hanging fruit has fallen," according to Seymour. "Now computer vendors are faced with more difficult sales" such as integrating Windows PCs with existing networks of Unix workstations, she said.

To win these kinds of sales, a large service organization is a key component. IBM and HP are ideally positioned to take advantage of these trends in the NT workstation market, Seymour said, while SGI has some work to do.