SGI's loss not as bad as forecast

SGI posts a net loss of 23 cents per share today, a less grim outcome than the 30 cents a share loss analysts had expected.

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SGI posted a net loss of 23 cents per share today, a less grim outcome than the 30 cents a share loss analysts had expected.

Including a $6 million savings in previously estimated restructuring costs, the company had a net loss of $40 million, or 21 cents per share, the company said.

"Despite our disappointing third-quarter results, we remain committed to our turnaround strategy," said SGI chief executive Richard Belluzzo in a statement. The company was hampered by transitions in workstation and server products, the company said last month.

Wall Street analysts had expected a net loss of 30 cents per share, according to a consensus compiled by First Call. They dropped down to that level after SGI warned on March 30 that losses would be deeper than expected.

However, the company's next quarter may bring better news.

Analysts currently project SGI will earn 2 cents per share for the fourth quarter, which would be the company's first profitable quarter since 1997. However, that profit wouldn't be enough to meet the company's previous goal of a third and fourth quarter in the black.

"That's not going to happen," said Bill Kelly, senior vice president of corporate operations at SGI. "Certainly the third quarter is not what we wanted it to be."

SGI expects to sell part of its stake in MIPS in May, reducing its stake in the spinoff chip company from 85 percent to 65 percent, Kelly said. At current prices, that move would raise $300 million in proceeds, he said.

SGI has gained some Hollywood fame by providing the technology to create computer graphics as seen in the movies "Jurassic Park" and, more recently, "The Matrix." Yet of late, SGI has been emphasizing more ordinary server products and higher-volume Intel chips.

Manufacturing problems with its new Visual Workstations--the first models in the company's computer line based on Microsoft Windows NT and Intel chips--have stung SGI. In addition to not being able to keep up with demand, the company experienced delays in rolling its new R12000 chip into its Origin server line, the company said.

SGI has been working on incorporating Intel chips since Rick Belluzzo moved over from Hewlett-Packard in 1998 to become SGI's chief executive. But Intel's 64-bit chips have been delayed until 2000, and the company has extended its own chip lifetime into the middle of the next decade.

Another changing element is in the operating systems the company uses. While SGI has begun shipping Windows NT machines, the firm also will ship and support Linux machines later this year. Linux is a Unix-like operating system that has been embraced by several major computer technology companies, including IBM, Compaq, Dell, SAP, Oracle, and HP.

The initial Intel-based systems, due this summer, will be basic, but SGI will move some of its fancy hardware into the machines in coming months, he said. The Visual Workstations have chipset technology that can transfer information rapidly between the CPU, memory, and peripherals like network cards.

"Whether it's that chipset or another, the point is our architectures are known for very high bandwidth," Kelly said. "Over time, we expect to bring that...to the marketplace."

Kelly said SGI has augmented its own Linux-savvy employee base with more from the outside, including experts with the Apache Web server software development effort.

Though SGI plans to release some of its Irix technology into the open source realm, the company hasn't yet finished planning that move, he said.

"We see Linux as an important part of the migration strategy for our customers as they move over time from the MIPS to Intel architecture," Kelly said. "Initially, that's going to be focused more at the lower ends of the spectrum. Over time, Linux will scale up."

Not all the action is in the Intel space, though. The next-generation R14000 chip will arrive in 2000, he said.

In addition, SGI's Origin servers now can use as many as 256 processors, and the company is working on increasing that count to 512, Kelly said. Though such computers still are popular chiefly with government research labs and supercomputer centers, SGI hopes the computers will increasingly appeal to customers delivering audiovisual information or conducting strategic business analysis.