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SGI cuts 600 more jobs

The additional layoffs mean about one in four employees of high-end computing specialist Silicon Graphics has been let go this year in an attempt to reduce expenses.

Silicon Graphics cut 600 jobs Wednesday, which combined with 400 cuts in May means about one in four employees of the high-end computing specialist has been laid off this year in an attempt to reduce expenses.

The additional job cuts will reduce SGI's operating expenses to about $100 million per quarter, meaning that it can reach operating profitability with revenue of $235 million to $240 million, the company said. The cuts are worldwide, but primarily affect employees at the Mountain View, Calif., headquarters, said Greg Estes, vice president of marketing.

In July, when SGI reported a net loss of $36.6 million on revenue of $240 million for its fiscal fourth quarter, the company said it would undertake further restructuring actions. The new layoffs will reduce SGI's employee count to about 3,000, Estes said.

SGI specializes in high-end computers for graphically intense tasks such as portraying models of cars or underground oil reservoirs. The company has struggled as competitors including IBM, Sun Microsystems and Hewlett-Packard have encroached on its turf, but SGI believes a new product line and a tight focus on specific customer types will help it reverse its revenue slide.

"Clearly, top-line revenue growth is our focus and the thing we need to accomplish," Estes said. "A lot has changed for us from a product perspective over the last six months. We have a greatly improved and more competitive lineup. We're very hopeful and very determined to grow revenue based around these product lines."

Most of the 460 U.S. job cuts in the new round will be done by the end of the week, Estes said. Although all divisions are affected, the company protected somewhat the salespeople and others who deal with customers, Estes said.

In other actions, SGI is consolidating real estate by leasing one of its campuses to search engine company Google and working to restructure its debt. A recent attempt at debt restructuring nearly succeeded but didn't attract enough interest, so SGI is back in negotiations with bondholders, Estes said.

SGI hopes to grow by selling its new Onyx4 and Tezro visualization systems based on the company's MIPS processors and Irix operating system, its Altix 3000 line based on Intel Itanium processors and the Linux operating system, and its storage products, Estes said. Although the company's overall revenue has dropped, storage revenue is increasing, he said, in part because of European broadcasting companies who use SGI storage products to archive and edit video.

Irix appeals to existing customers, but Altix has the potential to attract new customers, Estes said. "Itanium 2 and Linux are much more of an industry standard," Estes said. Few new customers are interested in adding Irix into their computing systems; "They're trying to lower the number of operating systems, not increase them," he said.

SGI will continue to improve its MIPS-Irix lines at least through the end of the decade, Estes said. At the same time, the company also will use the strategy it took with its Onyx4 visualization system--the use of mainstream graphics hardware--to its Linux systems.