SGI Stays the Course Amid Stock Woes

By Michael Feldman

November 30, 2007

On Nov. 6, SGI held a conference call for its first quarter financial results for fiscal year 2008, which generally put a sunny face on a three month period that was $36 million in the red. The good news was that the company increased Q1 bookings 43 percent compared to Q4 2007, and 19 percent compared to Q1 for fiscal 2007. According to SGI, orders increased in all sectors, especially the industrial sector, and without the benefit of any large individual sales over $5 million. From management’s perspective, the only disappointment was SGI’s storage platform sales, which declined and fell short of expectations.

Most of the increased bookings in Q1 had to do with overachieving Altix server sales. Since emerging from bankruptcy in October 2006, SGI expanded its server portfolio significantly. The addition of the Altix 450 mid-range Itanium blade servers, as well as the Xeon-based Altix XE servers and Altix ICE blade systems, gives the company a much wider range of compute platforms to offer customers. The highly computationally dense ICE blade systems have been particularly popular since their introduction in June 2007. Two weeks ago, SGI snagged the number 3 spot on the most recent TOP500 list with a 14,336-core, 28 terabyte ICE system acquired by the state of New Mexico for the New Mexico Computing Applications Center. While SGI loves the big money deals, in 2008 the company is looking to establish its volume selling strategy, with shorter sales cycles and more predictable profit margins.

Since joining the company as the new CEO six months ago, Bo Ewald has been busy elaborating the new strategy. “Basically our customers do three things over and over again,” said Ewald during the Nov. 6 conference call. “They compute things, they save the results, and they look at the results. Our mission is to provide the best products for each of those three areas and integrate them into a more complete solution than is available from other suppliers.”

That statement points to SGI’s intention to marry its compute platforms with its storage products and the new supercomputing visualization portfolio announced at SC07. Additionally, the company is working on an Industrial Strength Linux Environment, which integrates software on top of the OS to optimize application and system throughput, as well as reduce complexity for the user.

The overall plan of attack is to deepen penetration into established market segments and use that as a base to branch into other verticals. According to Ewald, in 2008 they’ll be focusing on four segments: defense and intelligence, industrial design/manufacturing, research, and high performance business. The defense and intelligence segment is their biggest customer segment today, but with a new portfolio, they foresee a big growth opportunity there. The company is also looking to expand its footprint in the industrial and research segments.

At the other end is the high performance business segment, where customers are looking to rapidly analzye large databases to make time-critical decisions. This is a new area for SGI, but one that it covets, since establishing a presence here would give SGI an entry into the larger enterprise computing space. The company believes its NUMAflex shared memory architecture is ideally suited for such applications, which typically require a lot of globally addressable memory. One of the platforms SGI points to for these types of applications is its Altix 450 system, which recently broke the Oracle Applications Standard Benchmark record, achieving an average response time of less than half a second for 3,000 online users.

The real trick for SGI will be to grow its volume business to the point where the company becomes profitable. Since this business model shifts sales toward lower margin, commodity-based platforms, SGI intends to add higher margin offerings into the mix through increased software licensing, as well as consulting and professional services. At the same time, the company has to keep its costs under control, so spending doesn’t outstrip revenue. SGI management seems confident it can accomplish all of this.

“While we have not yet achieved operating profitability, we are executing to our plan, which for this year is focused on making the investments necessary to drive more business volume,” said Kathy Lanterman, SGI’s chief financial officer. “We feel we’re on the right track with that strategy.”

But the market has its own logic. SGI’s stock, which hovered around $28-30 per share in the spring and early summer, is now trading at between $17 and $18 — around $2 below the initial post-bankruptcy stock offering a year ago. The company’s stock troubles have made some of its shareholders nervous.

During the Nov. 6 conference call, a gentleman from Deutsche Bank raised the issue of the declining stock value, asking the SGI reps on the call why there was a disconnect between the behavior of the stock and management’s own view of the company’s trajectory. “One thing is missing here,” he said. “Either what you guys are doing, the market doesn’t like, or the market doesn’t understand what you’re doing.” From his point of view, it was the latter. But in that case, the Deutsche Bank caller suggested they should be telling their story better and to a wider audience of investors.

The response from CFO Lanterman was that the company is committed to developing long-term value for the shareholders with their current strategy. She also confirmed that SGI recently filed a shelf registration for a possible future equity offering (which would indicate they are not currently interested in looking for a buyer).

Apparently, this stay-the-course strategy was not acceptable to everyone. On Nov. 9, three days after the Q1 conference call, Southpaw Asset Management LP, which holds 5.3 percent of SGI’s stock, filed a letter with the SEC recommending SGI’s board of directors “undertake a thorough review of strategic alternatives, including the sale of the Company.” Southpaw believes the current stock is substantially undervalued compared to SGI’s worth and the sale of the company could unleash some of that value. Furthermore, Southpaw suggested that the company’s 700 patents could be “separated” from SGI’s operating business with minimal disruption.

Southpaw went on to state:

We had originally intended to hold SGI shares as a passive investment. However, the significant decline in the stock price over the course of the past ten months, coupled with the Board’s “business as usual” strategic direction, compels us to become more active. While we are pleased by the Company’s turnaround since emerging from bankruptcy, as evidenced by the recent announcement of a 43 percent increase in bookings, the share price fails to recognize this positive momentum. It is our view that this will continue and that the only way to unlock value for shareholders is through strategic alternatives. For the Board and management to continue to take comfort in a turnaround story that is not being reflected in the stock price is unacceptable. We believe there are currently significant strategic alternatives for the Company and that it is incumbent on the Board to pursue these opportunities and deliver value to shareholders as soon as possible.

To date, no other investors have gone public with misgivings about the company’s direction.

For SGI’s shareholders, the stock nosedive over the last several months may seem foreboding. But it’s doubtful whether they questioned why the stock initially rose so sharply in early 2007. Maybe the people dabbling with SGI stock are the same ones who thought houses were such a bargain in the first half of the decade, and have now decided they’re tremendously overpriced. For the time being, the company seems prepared to let its business plan speak for itself and hopes that its investors give it time to let that that play out.

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