SGI Expects Return to Profitability, Exec Says

Struggling hardware vendor Silicon Graphics Inc. (SGI) will return to consistent profit-making in the second half of this fiscal year after completing a major overhaul of its business strategy, a senior company official said here today.

"We have got out of some areas of business which were not giving us enough value, like designing chips and our Cray vector processing," said Jay Silverman, vice president of marketing at SGI's computer systems business unit. "This first quarter of fiscal 2000 will be our restructuring quarter and we expect to be back in profit in the second half."

The fourth quarter of fiscal 1999, ended June 30, was the company's first profitable quarter in 18 months. SGI will continue its restructuring despite the abrupt resignation of former Chief Executive Officer Rick Belluzzo last week, according to Silverman. The company is already seeing encouraging growth in certain key markets, including the company's first entry into the Intel Corp. processor-based market, Silverman said.

"In the month since we launched the Intel-based SGI 1400 server line we have seen sales split equally between systems sold with Linux and those sold with Windows NT," he said. "One of our goals is to be the dominant player in the high-end Linux market, which is easily the fastest-growing server operating system right now."

SGI's Intel-based server sales will be tilted 70-30 in favor of SGI's Red Hat-based Linux operating system by next year, because of its Unix-like robustness combined with PC-type economics and its emergence as a credible computing standard, Silverman said.

In about a year's time, SGI will extend its line of Intel-based Linux offerings with the release of servers running forthcoming 64-bit Intel Merced processors, and will be one of the first to market with these systems, according to Silverman.

"We are pleased that HP (Hewlett-Packard Co.) is going to skip Merced and wait for the McKinley processor since we think that Merced is quite an impressive processor," said Silverman. McKinley is the code name for the second-generation 64-bit Intel processor expected to follow Merced.

SGI, in Mountain View, California-based, can be contacted at +1-650-933-7777, or on the World Wide Web at http://www.sgi.com/.

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