Re: FW: FYI: CF Article!!

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Posted by test... on May 21, 2000 at 14:02:20:

In Reply to: FW: FYI: CF Article!! posted by Sarah White on August 05, 1999 at 14:41:44:

: The following was forwarded to me by MJI, still at SGI:

: Report: SGI to sell off Cray
: =====================
: By Michael Klein
: Leader-Telegram staff

: SGI plans to sell its Cray Research supercomputer operations, an
: industry publication reports.

: Quoting anonymous sources within and outside SGI, High Performance
: Computing and Communications Week reported that SGI's strategy is to
: sell off business under the Cray name so it can focus on its core
: products:
: servers and graphics workstations.

: Analysts and SGI insiders also said they see signs of a sale, and the
: company has scheduled a strategy announcement for Tuesday, Aug. 10.

: Potential buyers include Compaq Computer Corp. or Sun Microsystems,
: HPCC reported. Another scenario would have SGI helping former Cray
: managers spin off the company independently, it said.

: Another analyst said a large aerospace company or other defense
: contractor is a likely buyer, because such a company could benefit from
: the supercomputer research and development Cray conducts, HPCC said.

: Cray Chief Executive Officer Richard Belluzzo dropped hints about
: selling Cray at a teleconference announcing SGI's quarterly earnings a
: few weeks ago, said Rich Partridge, an analyst with D.H. Brown
: Associates of Port Chester, N.Y.

: "Rick Belluzzo repeated frequently that the Cray contribution (to SGI
: sales) was less than 10 percent and dropping," Partridge said Monday.
: "And he said that SGI needed to focus, to concentrate on its key core
: competencies."

: Partridge said he thinks Belluzzo, by downplaying Cray Research's
: importance to the company, was preparing analysts for a sale of Cray
: assets.

: Asked about the reports, SGI spokesman John Cristofano said company
: officials don't comment on rumor or speculation.

: But Cristofano said SGI plans to disclose details of the second phase of

: its turnaround strategy on Aug. 10.

: SGI makes high-performance computers and graphics workstations. Its
: Cray Research division makes supercomputers.

: But not much is left of Cray Research.

: When SGI purchased Cray in 1996, Cray employed 1,700 people at its
: Chippewa Falls hardware development and manufacturing facility.

: Since then SGI has laid off many Cray employees, sold off parts of the
: former Cray plant in Chippewa Falls to other companies and started
: building several SGI products there.

: Today SGI employs about 860 in Chippewa Falls, and two-thirds of
: them work on SGI rather than Cray products.

: The SGI Origin 2000, Origin 200 servers and Onyx 2 workstations are
: built in Chippewa Falls, as are several Cray supercomputer models.
: Presumably the SGI operations in Chippewa Falls would remain part of
: SGI, sources said.

: SGI's merger with Cray has been rocky at times; some analysts say SGI
: has de-emphasized Cray's traditional mission to make the world's fastest

: supercomputers in favor of more profitable products.

: But Cray's decline is not all SGI's fault, analysts have said.
: Supercomputer sales declined as the power of smaller, cheaper
: computers skyrocketed, and the U.S. government cut spending on
: high-performance computers with the end of the Cold War.

: Partridge said Belluzzo, who's been CEO for a little more than a year,
: wants to do something dramatic. "It sounds like something is brewing,"
: Partridge said.

: According to the HPCC publication, SGI has been offering discounts as
: high as 80 percent on Cray machines to win defense contracts because
: it's
: having trouble keeping its core accounts.

: SGI is focusing on building and selling computers that sell in high
: volume, rather than the custom-designed supercomputers that Cray
: makes for a select group of buyers, Partridge said.

: "They don't have the luxury of carrying those parts that were unique and

: differentiated, that made them set apart," he said.

: Richard Sherman of RCI Ltd., a Minneapolis supercomputer user group,
: said Cray employees have told him they can't discuss the company lately,

: which would be consistent with a "quiet period" often enforced before
: such a merger.

: Sherman said if Cray Research obtained some stability and strong
: financial backing in a sale, the entire high-performance computing
: industry would benefit.

: Rebuilding Cray would be challenging, but the company has a good
: reputation in the industry and many old loyal customers that could be
: regained, Sherman said.

: Partridge said some customers, mostly government-funded ones, still
: buy the huge, expensive supercomputers Cray builds.

: "They're the proverbial `spooks and nukes' kind of projects," he said,
: referring to intelligence agencies and defense contracts.

: "I think it's a shrinking market, but it's not going to disappear," he
: said.
: "A solid core is going to continue, but it's not an exciting growth
: area."

: The question is how Cray's remaining assets would fit into another
: company, Partridge said. Although Cray's business is not huge, it's
: important.

: "I would like to think there's enough remaining of Cray that it could
: continue on its own," Partridge said.

: Klein can be reached at 833-9204 or (800) 236-7077.

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