HPCwire: CEO Dennis McKenna Plans for SGI's Comeback

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May 12, 2006

CEO Dennis McKenna Plans for SGI's Comeback

by Michael Feldman, Editor, HPCwire

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On Monday, SGI filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York. For industry watchers, the announcement came without surprise; SGI's fortunes have been declining for some time. The company has not recorded a profitable year since 1997. In their heyday in the 1990s, the company had 12,000 employees on a 26-acre SGI "campus" (now leased to Google) and were considered the premier maker of high-end graphics workstations and other high performance systems. In November of last year, SGI's stock was de-listed from the New York Stock Exchange after failing to maintain a minimum price of $1 a share for 30 consecutive days.

According to the bankruptcy filing, SGI listed its current assets at $369.4 million, while its liabilities were $664.3 million. In the proposed restructuring three of the major bondholders agreed to convert their $250 million debt into equity and loan SGI an additional $70 million to keep the company afloat. The company plans to emerge from bankruptcy within six months.

At the time of the filing, Dennis P. McKenna, the recently appointed, Chairman and CEO of SGI publicly stated that "we want to assure our customers, our employees and our communities that SGI is operating -- business as usual."

This week, HPCwire got an opportunity to speak with Dennis McKenna about the nature of SGI's difficulties and what he plans to do as the company reemerges from bankruptcy. He shares his views on SGI's missteps and offers a hopeful vision of the company's future.

McKenna says he came to SGI three months ago because he believed in the technology, the customers and the markets that the company has successfully served for so long. With some fundamental financial and operational re-engineering, he thinks SGI can continue to serve the IT community for the foreseeable future.

"Often times there's something wrong with the technology; the technical skill set is lacking," says McKenna. "And you need to fix that. From a product or technical standpoint, that's a long process -- usually a minimum of two years. SGI didn't have that problem. Its core competencies within its technical [domain] have always been there and still are there. It just needed to be focused and applied successfully relative to its go-to-market strategies. That's exactly what we're doing."

Over the past several years, the company accumulated hundreds of millions in debt that weighed down the company. From McKenna's perspective, there were three major reasons for SGI's long-term decline:

(1) The company was slow to adopt new technologies in the marketplace.
(2) As a result of various acquisitions that it made, it lost it's core focus.
(3) The management team expended a lot of its effort dealing with the outcomes of (1) and (2).

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