25 Sep SGI banking on Altix to pay the freight
New flagship supercomputer relies on off-the-shelf chips, open-source OS
Chippewa Falls, Wis.—This is crunch time for Silicon Graphics Corp. (SGI)—in more ways than one.
As the company’s sprawling manufacturing plant here scrambles to push product out the back door in the final days of its fiscal first quarter, it is hoping earnestly that the market for its latest flagship product, the Altix™ 3000 family of servers and superclusters, can carry it back to profitability.
In the 12 months ended June 27, the Mountain View, Calif.-based company lost more than $129.7 million. As of this writing, SGI’s stock was trading at $1.13, well below its 52-week high of $1.85.
The Altix 3000 is a Linux-based system that runs on 64-bit Intel® Itanium® 2 processors—a divergence from SGI’s Origin™ high-performance systems, which are based on the company’s proprietary MIPS®-IRIX operating environment. It also offers what the company calls global shared memory with its NUMAflex interconnect technology, which can manage very large data sets within one system-wide shared memory space.
Despite a wide range of new products—including the hot Tezro™ and Fuel™ lines of desktop visualization workstations and its scalable InfiniteStorage solutions—the company really is banking on riding Altix into the foreseeable future.
“That’s their only hope. They’re unable to remain competitive with their Origin line, because they’re require a high amount of research and development, and the market is going away from these types of architectures,” said Justin Udelhofen, analyst with Needham & Co., New York City, which specializes in observing and rating high-tech companies. “Now they’re leveraging their one value-add, their NUMAflex architecture.
“They’re competing against clusters that can be based on PCs, which can be extremely cheap,” said Udelhofen, who noted that Altix lies between PC clusters and old-line supercomputing equipment. “They are trying to create a new niche.”
Altix 3000 systems are available today in single-system configurations of four to 64 processors and in supercluster configurations of four to 128 processors. The company hopes to offer superclusters configurations up to 512 processors by October, the company reported last month. SGI also recently announced plans to extend the scalability of its SGI® Altix™ 3000 servers to a record 128 processors within a single instance of the Linux® operating environment.
The Altix is going to be the “lifeblood” of SGI, said David Randall, director of operations, worldwide manufacturing for SGI, as he showed off an Altix system on the plant floor recently.
“This quarter, we’ve already manufactured multiple 128-processor systems,” Randall said. “The future is going to be beyond 128. Where we’re going to get is kind of unknown as this point, I think.”
If the early indications bear any resemblance to the future, that point could be bright. In January, the Altix 3000 supercluster was named Best of Show at LinuxWorld 2003 in New York City. In addition, several high-end customers already have bought various configurations of the Altix 3000 system, including the Center for Computational Sciences at Oak Ridge National Laboratory and the newly founded Institute for Computational Biomedicine at Cornell University. Back in April, SGI announced it would be selling the UK COSMOS consortium led by Stephen Hawking one of its Altix 3000 superclusters.
The company needs that kind of market support to survive. It has $230 million of outstanding debt due in September 2004. With $140 million cash on hand, SGI needs the Altix 3000 to take the market by storm and convince bondholders to renegotiate the debt, according to Udelhofen.
“Revenues [have been] in a freefall,” Udelhofen said. “The theory is, if Altix takes off and revenue comes back, then the bondholders will say, ‘OK, let’s renegotiate.’ If Altix does not take off, bondholders will say, ‘No way, give us our cash or we’ll take you to bankruptcy.’
“They’ve got a little time; they’ve got a product that’s gaining early success. It could be quite good.”
Dick Harkness, SGI’s vice president of operations, worldwide manufacturing, said the combination punch of visualization, storage and scalable high-end supercomputing should bring it success.
“It’s the inherent architecture of the design that gives us the ability to scale like we can,” Harkness aid. “It certainly has helped us be competitive when we’re going against a large cluster of white-box PCs. So from a cost standpoint, a customer might [say], ‘Well, I can just hook up 500 PCs and get the same kind of performance.’ Well, no you can’t. We’re certain that with the Altix line … that’s where we could really come in and take back some of the market share we’ve lost over time to other competitors’ solutions.
“The storage part of our business actually is doing quite well,” he added. “We’re actually seeing our storage business grow, even though our revenues have declined the past couple of years. That’s another focus point for the future, and we hope that with the combination of what we’ve got going now, that the market’s going to like it. We hope to make a big dent.”
Lincoln Brunner is a Stevens Point, Wisconsin-based freelance writer and a regular contributor to the Wisconsin Technology Network. He can be reached at firstname.lastname@example.org.