CEO Dennis McKenna Plans for SGI’s Comeback

By Michael Feldman

May 12, 2006

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).

After McKenna took control of the company in February, he instituted immediate changes to relieve some of the legacy financial burden, including reducing the workforce by 12 percent and implementing other cost-saving plans to lower debt interest, rent and leases. These cost reductions were estimated to save the company $100 million up front, and an additional 50 million by the end of this year. But it soon became apparent that the uncertainty created by SGI's acute financial situation needed to be addressed before any more damage was done.

“There was a recognition that the financial instability of the company was having a negative effect on the revenues,” explains McKenna. “That uncertainty, relative to our future, was dampening those opportunities and that had to get fixed. So as we looked at options in talking to both strategic and financial partners, this [Chapter 11 filing] ended up being the most viable option to re-engineer the financial piece of the puzzle.”

McKenna says that the reaction from their customers has been very supportive.

“I've been here almost a hundred days,” says McKenna. “Before this [bankruptcy] announcement even took place, when I talked to customers, they had concerns about the financial viability of the company. But the next sentence was: 'We want to see SGI be successful; we like the technology; we like doing business with you. But you have to go solve this problem.'

“The key point for the customers in this announcement is this gives us a level of certainty relative to SGI's future. This is a defined process that has an endpoint. And that endpoint defines that SGI's financial structure will be stable. We have confidence in the direction that the new management team has outlined for us. We've gotten our operational cost structures in alignment and we have defined a strategy to improve the top-line revenue numbers.”

As far as SGI's suppliers, McKenna says it's “business as usual.” The Chapter 11 legal process dictates that. They've got contractual agreements in place to insure that happens.

But for the company's shareholders, there's no safety net. Prior to this week, its stock was selling at around 32 cents per share. Now the shares are worthless.

“That's the most painful part,” admits McKenna, “knowing people who have invested in SGI — long time supporters. And it's not just people outside the company, it's our own employees.”

Under the pre-negotiated plan, the secured bondholders will own the majority of the shares. The management team and the employees will own a small piece of the company. McKenna says that another group of bondholders will come in and also own a sizeable piece of the company.

So what of SGI's future? Here, McKenna believes there's lots to be optimistic about. According to him, the overall plan is to leverage the core strengths of the company to reinvent itself. Specifically, he believes that the company's competency in dealing with large database applications can be applied to a wide variety of verticals. The exponential growth of complex datasets across government and industry is viewed as a ripe opportunity by SGI. For example, their newly released Altix 4700 platform is targeted specifically at the multi-terabyte database customer. But SGI intends to broaden this technology into other segments.

“We will be expanding our addressable market,” says McKenna. “So how are we going to do that? Within the existing marketplace, we have over 6000 customers. That's a huge asset. Those customers like doing business with SGI; they like our products. And we have huge domain knowledge.”

But he also sees the opportunity to do better within their current markets. McKenna admits they haven't done a good job with bundling solutions across their vertical segments or portraying their products in a way that differentiates them from their competition. So despite doing a good job with a large customer population, they haven't marketed that expertise very well.

“That's opportunity number one,” says McKenna, “just doing a better job in the markets that we serve today.”

The next area SGI intends to focus on is the enterprise. For SGI, whose customer base is largely government and scientific computing organizations, the enterprise represents a new marketplace.

“They're dealing with this challenge of complex data — accessing it, analyzing it and transforming it,” says McKenna. “This isn't just a transactional world anymore in the enterprise space. They've hit a wall with database software within their present environments. We've been able to demonstrate a very compelling solution set for specific applications within the enterprise. We are in preparation and launch of those activities and there will be more announcements coming in the next few months.”

The third piece of SGI's transformation will be new products. According to McKenna, currently they're addressing only 20 percent of the existing budget dollars of their customers. The new products will allow them to address 80 percent of those dollars. And the platform on which these new products will be based — x86 based clusters. McKenna says they will use Intel-based processors for their new product line. A formal announcement is expected in mid-June.

“That's the new business model of SGI going forward,” says McKenna. “And it's all converging here in the July time frame. SGI is on a road to recovery and we're feeling pretty optimistic about our chances. This is a financial re-engineering step that was necessary. Now we have all the requirements here to move forward.”

Subscribe to HPCwire's Weekly Update!

Be the most informed person in the room! Stay ahead of the tech trends with industy updates delivered to you every week!

Penguin Computing Brings Cascade Lake-AP to OCP Form Factor

July 7, 2020

Penguin Computing, a subsidiary of SMART Global Holdings, Inc., is announcing a new Tundra server, Tundra AP, that is the first to implement the Intel Xeon Scalable 9200 series processors (codenamed Cascade Lake-AP) in t Read more…

By Tiffany Trader

Google Cloud Debuts 16-GPU Ampere A100 Instances

July 7, 2020

On the heels of the Nvidia's Ampere A100 GPU launch in May, Google Cloud is announcing alpha availability of the A100 "Accelerator Optimized" VM A2 instance family on Google Compute Engine. The instances are powered by t Read more…

By Tiffany Trader

Q&A: HLRS’s Bastian Koller Tackles HPC and Industry in Germany and Europe

July 6, 2020

HPCwire: Let's start with HLRS and work our way up to the European scale. HLRS has stood out in the HPC world for its support of both scientific and industrial research. Can you discuss key developments in recent years? Read more…

By Steve Conway, Hyperion

The Barcelona Supercomputing Center Offers a Virtual Tour of Its MareNostrum Supercomputer

July 6, 2020

With the COVID-19 pandemic continuing to threaten the world and disrupt normal operations, facility tours remain a little difficult to operate, with many supercomputing centers having shuttered facility tours for visitor Read more…

By Oliver Peckham

What’s New in Computing vs. COVID-19: Fugaku, Congress, De Novo Design & More

July 2, 2020

Supercomputing, big data and artificial intelligence are crucial tools in the fight against the coronavirus pandemic. Around the world, researchers, corporations and governments are urgently devoting their computing reso Read more…

By Oliver Peckham

AWS Solution Channel

Maxar Builds HPC on AWS to Deliver Forecasts 58% Faster Than Weather Supercomputer

When weather threatens drilling rigs, refineries, and other energy facilities, oil and gas companies want to move fast to protect personnel and equipment. And for firms that trade commodity shares in oil, precious metals, crops, and livestock, the weather can significantly impact their buy-sell decisions. Read more…

Intel® HPC + AI Pavilion

Supercomputing the Pandemic: Scientific Community Tackles COVID-19 from Multiple Perspectives

Since their inception, supercomputers have taken on the biggest, most complex, and most data-intensive computing challenges—from confirming Einstein’s theories about gravitational waves to predicting the impacts of climate change. Read more…

OpenPOWER Reboot – New Director, New Silicon Partners, Leveraging Linux Foundation Connections

July 2, 2020

Earlier this week the OpenPOWER Foundation announced the contribution of IBM’s A21 Power processor core design to the open source community. Roughly this time last year, IBM announced open sourcing its Power instructio Read more…

By John Russell

Google Cloud Debuts 16-GPU Ampere A100 Instances

July 7, 2020

On the heels of the Nvidia's Ampere A100 GPU launch in May, Google Cloud is announcing alpha availability of the A100 "Accelerator Optimized" VM A2 instance fam Read more…

By Tiffany Trader

Q&A: HLRS’s Bastian Koller Tackles HPC and Industry in Germany and Europe

July 6, 2020

HPCwire: Let's start with HLRS and work our way up to the European scale. HLRS has stood out in the HPC world for its support of both scientific and industrial Read more…

By Steve Conway, Hyperion

OpenPOWER Reboot – New Director, New Silicon Partners, Leveraging Linux Foundation Connections

July 2, 2020

Earlier this week the OpenPOWER Foundation announced the contribution of IBM’s A21 Power processor core design to the open source community. Roughly this time Read more…

By John Russell

Hyperion Forecast – Headwinds in 2020 Won’t Stifle Cloud HPC Adoption or Arm’s Rise

June 30, 2020

The semiannual taking of HPC’s pulse by Hyperion Research – late fall at SC and early summer at ISC – is a much-watched indicator of things come. This yea Read more…

By John Russell

Racism and HPC: a Special Podcast

June 29, 2020

Promoting greater diversity in HPC is a much-discussed goal and ostensibly a long-sought goal in HPC. Yet it seems clear HPC is far from achieving this goal. Re Read more…

Top500 Trends: Movement on Top, but Record Low Turnover

June 25, 2020

The 55th installment of the Top500 list saw strong activity in the leadership segment with four new systems in the top ten and a crowning achievement from the f Read more…

By Tiffany Trader

ISC 2020 Keynote: Hope for the Future, Praise for Fugaku and HPC’s Pandemic Response

June 24, 2020

In stark contrast to past years Thomas Sterling’s ISC20 keynote today struck a more somber note with the COVID-19 pandemic as the central character in Sterling’s annual review of worldwide trends in HPC. Better known for his engaging manner and occasional willingness to poke prickly egos, Sterling instead strode through the numbing statistics associated... Read more…

By John Russell

ISC 2020’s Student Cluster Competition Winners Announced

June 24, 2020

Normally, the Student Cluster Competition involves teams of students building real computing clusters on the show floors of major supercomputer conferences and Read more…

By Oliver Peckham

Supercomputer Modeling Tests How COVID-19 Spreads in Grocery Stores

April 8, 2020

In the COVID-19 era, many people are treating simple activities like getting gas or groceries with caution as they try to heed social distancing mandates and protect their own health. Still, significant uncertainty surrounds the relative risk of different activities, and conflicting information is prevalent. A team of Finnish researchers set out to address some of these uncertainties by... Read more…

By Oliver Peckham

[email protected] Turns Its Massive Crowdsourced Computer Network Against COVID-19

March 16, 2020

For gamers, fighting against a global crisis is usually pure fantasy – but now, it’s looking more like a reality. As supercomputers around the world spin up Read more…

By Oliver Peckham

[email protected] Rallies a Legion of Computers Against the Coronavirus

March 24, 2020

Last week, we highlighted [email protected], a massive, crowdsourced computer network that has turned its resources against the coronavirus pandemic sweeping the globe – but [email protected] isn’t the only game in town. The internet is buzzing with crowdsourced computing... Read more…

By Oliver Peckham

Global Supercomputing Is Mobilizing Against COVID-19

March 12, 2020

Tech has been taking some heavy losses from the coronavirus pandemic. Global supply chains have been disrupted, virtually every major tech conference taking place over the next few months has been canceled... Read more…

By Oliver Peckham

Supercomputer Simulations Reveal the Fate of the Neanderthals

May 25, 2020

For hundreds of thousands of years, neanderthals roamed the planet, eventually (almost 50,000 years ago) giving way to homo sapiens, which quickly became the do Read more…

By Oliver Peckham

DoE Expands on Role of COVID-19 Supercomputing Consortium

March 25, 2020

After announcing the launch of the COVID-19 High Performance Computing Consortium on Sunday, the Department of Energy yesterday provided more details on its sco Read more…

By John Russell

Steve Scott Lays Out HPE-Cray Blended Product Roadmap

March 11, 2020

Last week, the day before the El Capitan processor disclosures were made at HPE's new headquarters in San Jose, Steve Scott (CTO for HPC & AI at HPE, and former Cray CTO) was on-hand at the Rice Oil & Gas HPC conference in Houston. He was there to discuss the HPE-Cray transition and blended roadmap, as well as his favorite topic, Cray's eighth-gen networking technology, Slingshot. Read more…

By Tiffany Trader

Honeywell’s Big Bet on Trapped Ion Quantum Computing

April 7, 2020

Honeywell doesn’t spring to mind when thinking of quantum computing pioneers, but a decade ago the high-tech conglomerate better known for its control systems waded deliberately into the then calmer quantum computing (QC) waters. Fast forward to March when Honeywell announced plans to introduce an ion trap-based quantum computer whose ‘performance’ would... Read more…

By John Russell

Leading Solution Providers

Contributors

Neocortex Will Be First-of-Its-Kind 800,000-Core AI Supercomputer

June 9, 2020

Pittsburgh Supercomputing Center (PSC - a joint research organization of Carnegie Mellon University and the University of Pittsburgh) has won a $5 million award Read more…

By Tiffany Trader

‘Billion Molecules Against COVID-19’ Challenge to Launch with Massive Supercomputing Support

April 22, 2020

Around the world, supercomputing centers have spun up and opened their doors for COVID-19 research in what may be the most unified supercomputing effort in hist Read more…

By Oliver Peckham

Nvidia’s Ampere A100 GPU: Up to 2.5X the HPC, 20X the AI

May 14, 2020

Nvidia's first Ampere-based graphics card, the A100 GPU, packs a whopping 54 billion transistors on 826mm2 of silicon, making it the world's largest seven-nanom Read more…

By Tiffany Trader

Australian Researchers Break All-Time Internet Speed Record

May 26, 2020

If you’ve been stuck at home for the last few months, you’ve probably become more attuned to the quality (or lack thereof) of your internet connection. Even Read more…

By Oliver Peckham

10nm, 7nm, 5nm…. Should the Chip Nanometer Metric Be Replaced?

June 1, 2020

The biggest cool factor in server chips is the nanometer. AMD beating Intel to a CPU built on a 7nm process node* – with 5nm and 3nm on the way – has been i Read more…

By Doug Black

15 Slides on Programming Aurora and Exascale Systems

May 7, 2020

Sometime in 2021, Aurora, the first planned U.S. exascale system, is scheduled to be fired up at Argonne National Laboratory. Cray (now HPE) and Intel are the k Read more…

By John Russell

Summit Supercomputer is Already Making its Mark on Science

September 20, 2018

Summit, now the fastest supercomputer in the world, is quickly making its mark in science – five of the six finalists just announced for the prestigious 2018 Read more…

By John Russell

TACC Supercomputers Run Simulations Illuminating COVID-19, DNA Replication

March 19, 2020

As supercomputers around the world spin up to combat the coronavirus, the Texas Advanced Computing Center (TACC) is announcing results that may help to illumina Read more…

By Staff report

  • arrow
  • Click Here for More Headlines
  • arrow
Do NOT follow this link or you will be banned from the site!
Share This