Visit additional Tabor Communication Publications
December 15, 2008
Vendors in the HPC market might fare better in the recession than other IT sectors, but they're not immune to economic gravity. SGI's recent shedding of 15 percent of its workforce (225 employees) is one data point worth considering.
SGI's downsizing is certainly not unexpected. After all, the company has been bleeding money since it resurrected itself from bankruptcy in 2006. Apparently, the credit crunch and struggling customers forced the issue. According to a prepared statement from SGI CEO Robert "Bo" Ewald, "[T]he impact of the credit crisis and weakened global economy has caused SGI, along with our customers and other companies in our industry, to reduce expense levels to reflect the current business environment."
Less than a week before the announcement of the layoffs, NASDAQ issued a delisting notification against SGI because the company's market cap fell below $35 million. To avoid almost certain delisting, the stock will have to push the market cap back above $35 million for at least 10 consecutive days prior to Jan 2. As of December 15 the stock is trading at $3.35, yielding a market cap of 38.88 million.
The cutbacks at SGI probably should have taken place months, if not years, ago. In the last fiscal quarter (Q1 FY09), the company reported a net loss of $33.7 million. Compare that to $36.2 million in the same quarter of 2007 and $32.1 million in 2006. In the remaining three quarters of a typical year, the company is bleeding another $60 or $70 million. That sure has the looks of a structural deficit to me (As a California taxpayer, I have a pretty good notion of structural deficits.)
So will shedding 225 people do the trick? Not even close. Let's assume the average annual salary of the workers SGI laid off was $100,000. Probably high, but the SGI press release noted that "several executive and senior-level positions" were being cut loose. If we add a generous 50 percent on the base salary for a burdened salary of $150,000, that works out to a savings of only $33.7 million per year. That would only account for the deficits in the first quarter of the fiscal year, assuming of course laid-off workers weren't contributing at all to the bottom line.
To break even SGI needs to find a way to make up for the remaining losses in Q2 through Q4. The company outlined a few other cost-cutting measures it would pursue, but they were stated rather vaguely:
At this point there is no talk of letting go of any of the company's wide array of products, which encompasses Itanium-based servers, x86-based servers, clusters and blades, as well as a whole gamut of storage hardware and software offerings. At the same time, SGI stated its intentions to continue investing in its server products, visualization software offerings and ISLE (Industrial Strength Linux Environment) technology. That seems like a lot of product and R&D to support for company with a market cap below $40 million.
But SGI has always been a vendor of big intentions. At the recent SC08 show in Austin, it was showing off its futuristic "Molecule" supercomputer, made up of thousands of Intel Atom cores in a single rack. Adapting low-power chips intended for mobile devices for HPC machines is surely one of the most interesting models for supercomputing, but for a company that is trying to navigate its way back to profitability, it seems like a frivolous way to spend money.
With the global economy in free fall, 2009 will be a real test for SGI. The good news is that a tech-friendly administration and Congress will arrive in Washington next month and the new policymakers are apparently committed to a humongous (up to $1 trillion) government spending spree. If struggling vendors like SGI manage to tap into just a small piece of that largesse, they could survive the worst recession in over 30 years.
Posted by Michael Feldman - December 14, 2008 @ 9:00 PM, Pacific Standard Time
Michael Feldman is the editor of HPCwire.
No Recent Blog Comments
In a recent solicitation, the NSF laid out needs for furthering its scientific and engineering infrastructure with new tools to go beyond top performance, Having already delivered systems like Stampede and Blue Waters, they're turning an eye to solving data-intensive challenges. We spoke with the agency's Irene Qualters and Barry Schneider about..
Large-scale, worldwide scientific initiatives rely on some cloud-based system to both coordinate efforts and manage computational efforts at peak times that cannot be contained within the combined in-house HPC resources. Last week at Google I/O, Brookhaven National Lab’s Sergey Panitkin discussed the role of the Google Compute Engine in providing computational support to ATLAS, a detector of high-energy particles at the Large Hadron Collider (LHC).
The Xeon Phi coprocessor might be the new kid on the high performance block, but out of all first-rate kickers of the Intel tires, the Texas Advanced Computing Center (TACC) got the first real jab with its new top ten Stampede system.We talk with the center's Karl Schultz about the challenges of programming for Phi--but more specifically, the optimization...
May 22, 2013 |
At some point in the not-too-distant future, building powerful, miniature computing systems will be considered a hobby for high schoolers, just as robotics or even Lego-building are today. That could be made possible through recent advancements made with the Raspberry Pi computers.
May 16, 2013 |
When it comes to cloud, long distances mean unacceptably high latencies. Researchers from the University of Bonn in Germany examined those latency issues of doing CFD modeling in the cloud by utilizing a common CFD and its utilization in HPC instance types including both CPU and GPU cores of Amazon EC2.
May 15, 2013 |
Supercomputers at the Department of Energy’s National Energy Research Scientific Computing Center (NERSC) have worked on important computational problems such as collapse of the atomic state, the optimization of chemical catalysts, and now modeling popping bubbles.
May 10, 2013 |
Program provides cash awards up to $10,000 for the best open-source end-user applications deployed on 100G network.
05/10/2013 | Cleversafe, Cray, DDN, NetApp, & Panasas | From Wall Street to Hollywood, drug discovery to homeland security, companies and organizations of all sizes and stripes are coming face to face with the challenges – and opportunities – afforded by Big Data. Before anyone can utilize these extraordinary data repositories, however, they must first harness and manage their data stores, and do so utilizing technologies that underscore affordability, security, and scalability.
04/15/2013 | Bull | “50% of HPC users say their largest jobs scale to 120 cores or less.” How about yours? Are your codes ready to take advantage of today’s and tomorrow’s ultra-parallel HPC systems? Download this White Paper by Analysts Intersect360 Research to see what Bull and Intel’s Center for Excellence in Parallel Programming can do for your codes.
In this demonstration of SGI DMF ZeroWatt disk solution, Dr. Eng Lim Goh, SGI CTO, discusses a function of SGI DMF software to reduce costs and power consumption in an exascale (Big Data) storage datacenter.
The Cray CS300-AC cluster supercomputer offers energy efficient, air-cooled design based on modular, industry-standard platforms featuring the latest processor and network technologies and a wide range of datacenter cooling requirements.