Silicon Graphics Likes It Hot

With 45 percent revenue growth in the past year, the 3-D pioneer looks to the future and focuses its energies on government medical imaging, federal banking, database servers for federal agencies and World Wide Web servers for agencies setting up home pages on the Internet

As thousands of Silicon Graphics Inc. workers filed past eight canopy-covered buffet lunch tables on its Mountain View, Calif., campus, Huey Lewis & the News took the stage and launched into "The Power of Love."

Lewis pumped out his theme song for the science-fiction movie "Back to the Future," which sported special effects created on SGI computers by George Lucas' Industrial Light & Magic Co., while a few of the casually clad crowd blasted each other with water soakers. Above, a biplane towed a banner: "Silicon Graphics -- best employees on the planet."

The occasion: The annual all-hands party, where the staff learned the computer builder's revenues had grown 45 percent in the past year, supporting applications from spectacular commercial film effects to flight simulators to abstruse science studies. Chairman and CEO Ed McCracken announced the precise figures -- $2.2 billion for $225 million net profit -- and President and COO Tom Jermoluk informed the workers they would receive $1,000 Swiss watches or cash bonuses for their efforts. "It's always like this," said Dee Dee France, a programmer for SGI subsidiary Mips Technologies Inc., which builds the RISC computer chips that power SGI's workstations and file servers. "Who was it last year? Kenny Loggins?"

She could easily have been talking about SGI's growth, which gets bigger annually. A year earlier, the firm posted a 36 percent revenue increase, following a jump of 26 percent in 1993 to clear $1 billion, beating a 24 percent spurt in 1992 (although that year the company posted a net loss of $118 million after merging with MIPS Computer Systems). But such are expectations for the leader in 3-D computer simulation that its stock value dropped at the news. Industry watchers had anticipated 47 percent growth. And a local newspaper suggested revenues would have jumped by two-thirds, if not for SGI's $22 million purchase of Alias Research Inc. and Wavefront Technologies Inc. last spring.

SGI's product line descends from the Geometry Engine developed by former Stanford University assistant professor Jim Clark, who founded the company in 1982.

"I wanted to build a graphics machine that was low-cost," recalled Clark, who departed in January 1994 and helped found Internet software innovator NetScape in adjoining Palo Alto. "I started the company with the name 'Silicon Graphics' to imply high-performance graphics would be inexpensive." Those were the days of green or amber command prompts on black screens, when the closest desktop computers came to 3-D representations were crude skeletal line drawings. Established 3-D systems cost about $250,000. The Defense Department's Advanced Research Projects Agency supplied seed money to get futuristic concepts to market to lower their cost -- a policy that launched not only SGI but Sun Microsystems and MIPS. The firm offered graphics terminals in 1983 and workstations in 1984 for about $70,000, then went public in 1986.

Clark's Geometry Engine has long since evolved into the Reality Engine. And SGI's original IRIS line transformed into the low-end Indy, the Indigo2 and Power Indigo2, the Onyx and Power Onyx supercomputers, Challenge network server and the Power Challenge supercomputer, touted as matching up to 18 Cray Research Inc. Y-MP class models.

Although Cray Research and IBM Corp. cast long shadows across the supercomputing field, marketing vice president David Bagshaw cited a recent study that concludes SGI machines power 128 of the world's top 500 supercomputing centers, compared to 125 for Cray and 72 for IBM. The company has made inroads by combining several general-purpose microprocessors instead of developing single-purpose chips.

Ironically, that push to compete at the limits of computer capability pushed Clark out of the company. "Our early machines had to be priced very high," he said. "The result was a high-price mentality in the sales/marketing organization that hasn't changed much, even today. I got tired of the bias that existed toward the ultra-high end."

With its Federal Business Group only one year old, SGI is bullish about its future with the feds. Its Silver Spring, Md., sales office opened in 1986 and now the corporation has five offices in and around the Beltway. Customers include the Energy and Defense departments, the National Aeronautics and Space Administration, and the National Oceanographic and Atmospheric Administration. Sales for 1994 totaled $211 million, two-thirds of that through integrators such as Loral Corp., E-Systems, Nichols Research and TRW Corp.

"The demand is there. Everywhere we look is another opportunity," said Lynne Corddry, manager for federal business development in Silver Spring. "We won a U.S. Postal Service award in October to install 10,000 kiosks. Kiosks were not something we were looking at. One of our fastest growing areas is in classified defense [applications]," she added. "We've done a lot of teaming with EDS, Grumman and Boeing in high-performance computation."

Silicon Graphics has teamed with EDS to compete for a U.S. Air Force contract that will be awarded in January. If SGI wins, it will elevate us as a major government player, Corddry said.

In the coming year, the federal group will focus on government medical imaging, federal banking, database servers for federal agencies, and World Wide Web servers for agencies setting up home pages on the Internet. But SGI CEO McCracken plays a much more visible role in Washington. He was one of the most prominent supporters of a Clinton presidency, and he remains one of the few high-tech business leaders continuing support for the administration. As co-chair of the National Information Infrastructure Advisory Council, he helps the Clinton administration shape its policies to develop the infobahn. He sees a world divided into those in touch with the information revolution and those left behind.

"I think society is going to be very different in the 21st century," McCracken said. "Much of the communication will be over networks. If people are not part of that, they will be disenfranchised. We have to educate people to be part of the new world."

That includes leaders of nations. "Countries' investment in telecommunication will determine their infrastructure," he said. "Clinton sees that." Representatives in the Capitol, by contrast, often don't have the background to fully grasp the impact of technology policy decisions, he says. "To me, the big issue is educating legislators."

If the information age unfolds in the direction McCracken and his team anticipate, the company doesn't expect to run out of customers anytime soon. Clark "wanted to build a computer that would emulate the real world," explained Bagshaw. "We still have that quest. We're 10 percent of the way there to do it."

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