"You're welcome to pull the arrows out of my back."
This is how SGI chief executive Bob Bishop jokes about attacks he took from
investors and Wall Street for streamlining the company during the past year.
Once known as Silicon Graphics, SGI morphed during the year from a company
selling supercomputers, large servers, multimedia software and embedded
chips used in consumer devices into one catering to just a few markets:
technical and scientific computing and digital content creation.
Along the way, Bishop shed four divisions, including the well-known Cray
Computer operation, and
advanced SGI's aggressive push into Linux. But the changes meant a
continuous string of one-time charges and uncertainty about SGI's future.
The company's stock price plummeted, and Bishop had the misfortune of
delivering quarter after quarter of losses.
Bishop took the hot seat Aug.
23, 1999. With his first year
at SGI's helm behind him, new products to market and the start of a new
fiscal year, Bishop is optimistic, feisty and even psychic. He told CNET
News.com's Joe Wilcox that he expects a return to profitability in fiscal
CNET News.com: You took it on the chin from Wall Street over the
Bishop: I decided to take all the hits. I knew when I came to this job I'd
have to take the hits, and I took the hits.
All of those steps had consequences: a number of one-shot charges in the
books as we do this. The financial community had to look closely at what
was going on, because it affected our tax position, affected our revenue
position, head count, cost of goods, gross margins, every number.
I spent a year trying to explain this. I'm actually happy that in our
fiscal 2000, which ended June 30, we really got through it all. I'm just
delighted we're off to such a fresh start in fiscal 2001, and we have the
entire product portfolio to the market.
Those steps you took involved cutting loose four divisions. What can you
tell me about letting Cray go?
I divested four pieces to get simplicity, clarity and full alignment.
That's why I did it.
We started by divesting Cray, so we're out of the vector (computing)
business. We could not marry...a vector and parallel (computing)
architecture. There's a religious difference, and we rightly concluded this
marriage doesn't work, so we divested the vector piece and kept 800 Cray
and the lion's share of the technology. We chose the pieces to integrate
with the parallel architecture.
We're quite happy with what we did. And now the 800 people from Cray that
stayed with us are highly motivated SGI people. There's no religious
You also cut loose your MIPS chip business and some share value with it.
We're 100 percent committed to the MIPS-Irix product line. We had built an embedded chip business, embedded into
consumer products. It was highly successful; there were approximately 50
million chips per year being shipped into consumer products.
For example, Sony PlayStation...and...Nintendo 64--they all run on MIPS.
Laser printers, automobiles, and all different products. But it did not
fulfill our mission, our sweet spot, focused on the technical computing
user from a system point of view. So we divested that.
Keep in mind the designers for the high-end MIPS are still in our company.
And we have a road map to take MIPS from 400 MHz today out through 1 GHz in
the near future.
Where are you now after the divestitures?
The consequences on the remaining part of the company--about 6,800
employees--is a highly focused, streamlined operation focused on a single
mission. And the sweet spot of that single mission is the technical
You are now focusing on technical and scientific computing and creative
content, such as film production. But haven't you backed yourself into a
Our revenue is only about $2.5 billion, but we estimate that market to be
$25 billion. We only have 10 percent of that market and lots of room to grow.
You've had a string of unprofitable quarters. Do you expect a turnaround
during fiscal 2001?
We've given guidance to Wall Street at our last call on July 20 that we
would be profitable for the full fiscal year 2001 and that we would be
growing the revenues somewhere between 15 and 20 percent. That's the
guidance we gave Wall Street, and we're on target to do that.
So you are 100 percent confident the rough times are over?
We did the turn. Emotionally, the company's turned. And it's getting runs
on the board. Getting runs on the board is pretty important to Wall Street.
You can't change their game. That's their game. We're back. We're back
quite strong. The products are great, and the motivation in the company's
quite high right now.
What's one of SGI's biggest failings?
We've sown the seeds of innovation but failed to harvest them. Someone else
has come along with stronger marketing capability or putting in lower-cost
systems and found a way to harvest our work.
I'm anxious to learn how to harvest more of what we sow. We are truly
respected as the central innovator in this space, but we truly have not
harvested volume, nor profits, from this effort.
In July, you unveiled the Origin 3000 server and pinned much of the
company's future on the product line. How is it doing?
We had $100 million in advance orders and feel strong about what we have to
offer. These new products are
mind-boggling. These new servers have got attention. Now we've got to
deliver these new products in volume, and we are dealing with a number of
supply constraints in the industry, which are affecting everybody at this
Component shortages have hit everyone hard. How are you dealing with the
It's amazing how this problem is
permeating the industry. We're clawing our way through it. It's a
day-by-day struggle with our vendors, but we've got most of our componentry
pinned down. We don't have as much upside as we want. Because we are at a
point of takeoff and our booking stream is quite strong, we would like to
be able to deliver more rapidly.
I understand you expect Linux to account for half of SGI's revenue
within five years. How does your Linux strategy interact with your
We offer a full line of Linux products, but only on Intel (processors). We
don't offer the crossover. We're not putting Linux on MIPS.
When Intel has its Itanium processor on the market, we will soon have a
full range of IA-64 Linux products. The architecture is already done. The
subsystems are already done. It draws upon what we've done on the MIPS-Irix
side, so we don't have to redevelop this.
So we're ready to go, and we think Intel will have the chip ready by the
end of the year. Then our systems will follow probably in the March time
frame next year.
Linux is gaining momentum, but don't you think your revenue plans are
No one can truly predict the potential for Linux, but our scope of it is
that it's, firstly, tightly linked to the Internet world. I think today it
already occupies probably 25 percent of the servers in the Internet space.
We're very focused on broadband Internet. Our servers we're looking to
deploy in a broadband Internet space, where scalability and throughput
become imperative. We're not talking about alphanumeric data, but visual
content, interactive content, immersed content and continuous changing
content. That's the world of broadband Internet.
So you're talking about leveraging your technology used in creative
content areas, such as film editing and digital film creation?
Yes. And not just old-generation movies, the archive movies. We're talking
about new-generation movies that have an interactive content component,
where the viewer is immersed and has some dialog with the characters and plot.
We haven't yet seen the Internet next-generation, new genre content. But if
you had to compare it to anything, it would be the video game environment
extended over the Internet with multiple players. That kind of content is
very sophisticated, involving high-speed access to big databases. We're
ready to deliver that with our new architecture.
What kind of business opportunities do you foresee in this market?
We think media will be sold and transacted, and instead of e-commerce we
really should be talking about media commerce. That transition is under way
because of the emergence of broadband Internet. We're gearing ourselves for
broadband Internet. We see our new architecture fitting into that space,
and Linux will be the gateway to broadband Internet.
Do you plan to do more with marketing? Say, promoting your technology's
use to make successful movies?
We have come to a kind of rebirth, the relaunching of the company. We have
committed some pretty significant funds to global promotion. For example,
it's on our platform that "The Perfect Storm" special effects were
developed. It's on our platform that the whole "Space Cowboys" simulations
and special effects were developed.
I can go on discussing this, whether you're talking "Toy Story" or
"Jurassic Park." It's our stuff, and we have not taken advantage of this as
we should have.
For example, "The Perfect Storm" is a global phenomenon. It's a cult. And the
animation and special effects are just phenomenal. We should be riding
along, and our promotion should match what we've done for those customers.
If you had one thing you would like to communicate to your customers,
competitors and Wall Street, what would that be?