Shortly after I published my SGI Special Edition Podcast, I was contacted by a former SGI Engineer (who preferred to remain Anonymous) with several stories to tell of what happened to SGI. It’s an amazing story full of minor hardware glitches that wound up costing millions, bone-headed oversights during acquisitions, and basic mismanagement of a billion dollar company. The story is far too long and involved for a single post, so I’ll be adding it in chapters over the next few days. So come on inside and witness the saga of what really happened to SGI over the years.. The story has never been told, until now. We’ll begin at the Top:
Chapter 1: The Management
1. Rick Belluzzo
Many people place the downfall of SGI squarely on the shoulders of one person: Rick Belluzzo. During his short tenure as CEO of SGI, he made one of biggest mistakes that haunts SGI to this day: He settled with NVidia. One little-publicized point in the settlement with NVidia was that SGI completely exited the high-end graphics market (1). The teams within SGI working on their high-end graphics solutions were decimated, with only about 1 in 10 employees remaining. But the low-end graphics teams were removed as well, being told that they were to become NVidia employees. This decision single-handedly destroyed the G in SGI, and left many people wondering what SGI could bring to the table.
But that’s not all that can be blamed on Belluzzo. Another decision that irreparably hurt SGI’s position in the marketplace was to abandon IRIX & MIPS [2]. While MIPS may never have become the core of modern supercomputers, it did find a home in modern embedded platforms. MIPS processors can currently be found in everything from TV set-top boxes to Cell Phones, and the company is doing well to this day. By abandoning MIPS and IRIX, SGI opened a window to allow other players in the 64-bit embedded space, leading to the current domination of the space by Intel and AMD.
But even before Rick Belluzzo, there was another: Ed McCracken.
2. Ed McCracken
There’s many stories and legends about Ed McCracken. He worked at Hewlett Packard before becoming CEO of SGI, and under his leadership, SGI flourished. Rising quickly to one of the premiere companies within Silicon Valley, he was eventually outed in 1997 when SGI lost money in 4 of 5 consecutive quarters. [3] You might think this was due to the Dot-Com Bubble bursting, and you’ld be partially right. Actually, the Dot-Com bubble burst in 2001, 4 years later. What really happened to SGI under Ed McCracken? Many things, as you’ll read later, but a few can be directly attributed to Ed’s lavish behavior.
SGI’s lavish parties during the time were the stuff of Legend. Being invited to an SGI party was the geek equivalent of being invited to the Playboy Mansion. No expense was spared as Huey Lewis and the News, Natalie Cole, Kenny G, Penn & Teller, Tony Robbins, and more were present. $10,000 bar tabs and $8,000 dinners were the norm, and expensed directly to SGI. Ed also missed obvious signs of what was happening with SGI (They lost money for 4 of 5 consecutive quarters remember? That’s a full year of losing profits), probably because he spent too much time hanging around with Bill Clinton & Al Gore. [4] He spent so much time and money hanging around with popular people that some analysts christened SGI as “the new Apple”. And that was all find with Ed, as he had his $5.3M severance payment to mend his sorrows. [5]
But between the two was another great SGI Visionary: Bo Ewald.
3. Bo Ewald
When Ed McCracken left SGI, Gary Lauer, president of SGI’s World Trade division also resigned. The only person available to fill the hole was Bo Ewald, the acting COO, who became the Executive Vice President. He eventually left SGI to lead an Online postage company in 1998 (E-Stamp), then a network filesystem company Scale-8, an HR Company named Ceridian, and finally to Linux Networks [7]. One interesting tidbit from our insider is that Bo Ewald was from Minnesota (his Cray roots) but he eventually moved to Mountain View, CA and bought a home, with $5M given to him by SGI. Merely a few months later he left for E-Stamp. He eventually returned to SGI in 2007, and SGI then bought Linux Networks (his previous company). Many people have pointed out that several companies have folded under Ewald’s leadership (Not all, but several). Combine that with the fact that he left Linux Networks in 2007, and they quickly began to hemmorage money until they were acquired by SGI in 2008. Ewald’s unique travels amongst HPC companies (Cray, SGI, Linux Networks, SGI again) have been well documented [6], so I leave it as an exercise to the reader to see his contributions.
But the demise of SGI isn’t completely at the hands of the CEO’s. There were also some strange acquisitions along the way.
- Be sure to come back and see Chapter 2 : Acquisitions. You can follow the entire series via the sgi-bts (behind the scenes) Tag.
References
[1] The Register – Belluzzo’s NVidia Pact Sealed SGI’s Fate – 13 May 2006
[2] The Register – Microsoft Man’s Shadow over Bankrupt SGI – 9 May 2006
[3] bnet – SGI’s CEO McCracken Tumbles – 3 Nov 1997
[4] Business Week – The Sad Saga of Silicon Graphics – 08/04/1997
[5] CNet News – SGI shakup came at a hefty price – 16 Sep 1998
[6] Linux Magazine – Expediting Synergistic Paradigms – April 14th 2009
[7] Linux.com – Linux Networkx tabs Bo Ewald for CEO – June 14 2005
The views and opinions expressed in this page are strictly those of the author. The contents of this article do not necessarily reflect the views or opinions of VizWorld.com.
Lets not forget it was Ed McMuffin I mean McCracken that forced out Jim Clark. Jim was the genius behind SGI and went on to have a brilliant career. I read the book about Jim (Netscape Time)and he was pretty bitter about Ed. Jim went on to become a billionaire, and currently owns the largest privately owned yacht in the world ( see http://www.yachtforums.com/forums/royal-huisman-yacht/3738-review-royal-huismans-athena.html)
Where is Ed???
McKenna apparently did an okay job pulling them out of the red. Read a story about it somewhere.
Then they dumped him.
Smooth move, ex-lax.
@RabbJohnny
Should Read:
RIF’ed BEFORE Bob Bishop could do any serious damage
WHAT?!?! No mention of TJ?
Chances are the “former SGI Engineer (who preferred to remain Anonymous)” was RIF’ed Bob Bishop could do any serious damage. 😉
Linux Networx was a total and complete financial basketcase before Bo came in.
The idiots previously running the company hadn’t even filed their freakin corporate income taxes.
@ms My original offer stands.. Write up some examples and send it to [email protected] and we’ld love to run it!
Bob Bishop should have been mentioned. He did as much or more damage as Rick Bell-loser did!
Under both of their guidance, SGI still kept spending money on travel, parties, etc, even though they were losing $40 million per quarter.
@@notsofast
True, they’ve all got some blame in this.. If you have any concrete examples, tho, I’ld love to hear them 🙂
Where is Dennis McKenna is this mix? How about Bob Bishop? Interesting to note the lack of mention of past CEOs…
@Anonymity True… but in the process, Linux Networx went up in smoke.. So it’s effectively an acquisition where they fired all the employees.
KNOW THE FACTS. SGI DID NOT aquire Linux Networx. SGI aquired some Linux Networx SW, patents and technology.