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Silicon Graphics restructures, sheds jobs

Silicon Graphics Inc. (NYSE: SGI) revealed Tuesday plans to refocus its computer workstation business, and unveiled its second restructuring in less than a year, with plans to spin off its media operations and shed up to 1,500 jobs.

Shares in the Mountain View, California-based company dropped more than 8 percent, down 1 5/16 to 14 7/8 following the news.

SGI blew past analysts estimates in the fourth quarter, the pivotal point for its turnaround from disappointments and product delivery problems.

SGI announced seven major restructuring moves which will focus the streamlining of its operations which has been underway for the last 18 months, according to Rick Belluzzo, chairman and CEO. SGI's workforce will be reduced by about 1,000 to 1,500 employees as a result of these alliances and related reductions in marketing, sales and administrative personnel.

Here's the breakdown of SGI's moves:

  • The company said a separate business unit will be created to manage its Visual Workstation line of Windows NT platform-based workstations through a joint venture with another computer systems company.

  • SGI's Cray-branded supercomputers will also have a business unit to manage them, along with future vector-based products. SGI is in discussions with potential partners to assume its operation.

  • SGI also announced more details of its alliance with NVIDIA Corporation (Nasdaq: NVDA). The two companies will work together on next-generation graphics products and an SGI graphics engineering team will transfer to NVIDIA. The move is also intended to accelerate product time-to-market.

  • SGI will also create a new business unit to target emerging opportunities for broadband Internet systems, the company said.

  • SGI's MediaBase media streaming application will be spun of into a newly formed company with venture capital backing, in which SGI will hold a significant minority stake.

  • The company formed a relationship with Veritas Software (Nasdaq: VRTS), as part of the company's plan to enhance the file system and other system software on the IRIX and Linux platforms.

  • SGI will also form an alliance with NEC Corporation for the marketing of high-performance systems in the Japanese market.

    "The emergence of the broadband Internet over the next several years, together with the growth of Linux and other open source technologies, will create huge opportunities for SGI as a result of our leadership in high-bandwidth computing architectures and our established franchise with content providers," Belluzzo said of the company's refocusing.

    Despite SGI's improvement many analysts have questioned whether the company can deliver successful products.