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 2: The Acquisitions
1. Alias & Wavefront – 1995
In 1995, SGI acquired Alias Research and Wafefront Technologies and merged them into the famous “Alias|Wavefront”. For a graphics company strongly linked to high-end rendering solutions like the kind used in Hollywood, this was an obvious marriage of technologies. SGI provided the hardware resources, and Alias|Wavefront provided the software in Maya. SGI held onto it for nearly 10 years, until in June2004 they sold Alias to a private equity invetment firm Accel-KKR for the paltry sum of $57.1 Million. [2]
For years Maya has been considered a premiere tool for visualization, and when SGI initially acquired them the software only ran on IRIX. SGI eventually, under the fine leadership of Rick Buzzello, abandoned IRIX for more mainstream systems like Windows, requiring them to port their prize rendering product to the other platforms. SGI’s failure to keep that close tie between the rendering software and hardware, coupled with the introduction of high-end consumer graphics tools from other sources (ATI and NVidia), made Maya an attractive resource for any company to have. Accel-KKR didn’t have to wait long or try hard before Autodesk, owners of 3D Studio Max, took Alias|Wavefront off their hands for $182M in cash just 16 months later. [3]
2. Cray – 1996
Widely considered one of the most poorly management acquisitions in SGI’s history, SGI bought Cray Research for $740M in February 1996. Again, this was a logical acquisition for SGI, as Cray was a widely successful supercomputer company, with several systems deployed around the world. SGI wanted large supercomputers to supplement their existing rendering systems, and to break into a new profitable market. However, only 3 months later, they sold the CS6400 product to Sun. [5]
The CS6400 was a Sparc-based supercomputer from Cray that was meant to replace the Cray S-MP. SGI didn’t think very highly of the product, and in face when the engineers were asked how much they thought it was worth, the answer was pretty indicative of their feelings: “it didn’t matter what price they got as it wasn’t worth a shit anyway.” The exact amount of this sale was never disclosed, but our inside source says the number $60M was thrown around alot. When Sun bought the CS6400, they rebadged it as the Sun Ultra Enterprise, and it became the foundation unit of a whole line of (very profitable) servers and workstations for Sun. [6] Scott McNealy, CEO of Sun, is known to have said that their purchase of the CS6400 was the best investment since Microsoft bought DOS.
But that’s not all that went weird about the Cray Acquisition. SGI was already beginning to show some red in their balance sheets, Cray’s profits were slim. SGI made the decision to operate the two companies almost independently, making it easier to cut Cray if the need arose. Less than 4 years later, they sold the entire company to Tera Computers, giving us the Cray we know today. [4] But it wasn’t a total loss, as the Cray engineers working at SGI during that 4 years created the trademark of SGI supercomputers: NUMALink.
Another interesting tidbit about this acquisition from our inside source has to do with some of the SGI perks. SGI paid very well back in the mid-90’s, as was the custom during the dot-com boom. When the Cray engineers came over, they all got a very significant pay-raise under the guise of “bringing their pay up to SGI standards”. This made retention figures high, but vastly increased the operating costs of the Cray-under-SGI company. Also, SGI (At the time) offered employees a 6 week sabbatical (paid vacation) for every 4 years of service. During the merger, SGI chose to honor years of service with Cray (nothing special there, many companies do this) but did not place any restrictions on this Sabbatical. That meant that employees with 20 years at Cray, suddenly found themselves eligible to take 6 months of paid leave (20 /4 = 5 sabbaticals, 6weeks * 5 = 30 weeks). It’s no surprise that there was little-t0-no opposition to selling the CS6400 at only 3 months in. Update: Commenters claiming to work for Cray during this period disagree, and claim a single 6-week Sabbatical was offered after 1 year.
3. The Intergraph ZX10
In September 2000, SGI acquired the ZX10 series of workstations and servers from Intergraph computers. SGI had long attempted to build a workstation business, and when they abandoned MIPS processors they decided to buy a division for a quicker start. But the workstations and servers weren’t the only thing they bought, they also got the staff of the Huntville, AL based company that worked on the products. [1]
The Cray scenario played itself out again, as employees were given the months of sabbaticals from the honored years of service. Intergraph was founded in 1969, so there was plenty of time to go around. This actually worked out in SGI’s favor, however, as that gave them time to spend just over $1M to build out an office suite to house the employees. Unfortunately, the product never took off and the employees were laid off less than 2 months after the construction was completed, all with SGI’s attractive severance packages.
There have been other acquisitions along the way, such as Linux Networks in 2008, but none have had the devastating affects on Morale and the bottom line like these three. Acquisitions don’t make a company tho, for that you have to make product. But not all product works according to plan, and in SGI’s case exceedingly so..
- Be sure to come back and see Chapter 3 : Hardware Problems. You can follow the entire series via the sgi-bts (behind the scenes) Tag.
References
[1] SGI/Intergraph finalize terms of Strategic alliance – Nov 1 2000
[2] Accel-KKR to Acquire Alias from SGI – April 15 2004
[3] Accel-KKR And Ontario Teachers’ to sell Alias for $182M – Nov 6 2005
[4] Tera to acquire Cray vector business form SGI – 02 Mar 2000
[5] SGI sells Cray’s Sparc Superserver business to SUN – 20 May 1995
[6] How the Sun Enterprise 1000 was born
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.
The CS6400 was not re-badged as the Sun E10K. The E10K was a completely new system that Cray was getting ready to release in 1996 but due to the acquisition and sale to Sun was not released until 1997. Same idea as the CS6400 (64-way SPARC SMP server) but completely new and different processors. The sales price of the Cray SPARC division was about $23mill. That included not just the server technology but all of the engineers and the sales, marketing, manufacturing personnel in the Cray SPARC division which was located in Beaverton, Oregon and San Diego. The Cray SPARC division did not fit well at Cray (Cray acquired FPS Computing to create this “division”) and would not have fit in at SGI (SPARC/Solaris instead of MIPS/Irix) but it fit great at Sun. As an employee of this division at the time of the acquisition we were delighted to be part of Sun instead of part of Cray or SGI as the fit was much better.
I totally agree with all of the posters below: CrayLink (aka. developed under the code name “LegoNet” – till the plastic block company found out and got irritated) had nothing to go with Cray. It was an all-SGI development, with initial research coming out of Stanford. The decision to call it CrayLink was pure marketing, and really annoyed many of the fine engineers who worked on that technology.
One of the things I was told, circa 1998-99, was that SGI had acquired Cray with a “handshake” agreement from certain Cray-purchasing US government customers that a particular level of sales would be maintained. I was told that the USG failed to comply with that agreement, and denied making it. This led to a defocusing in the MIPS team on a couple of very specific features (eg. popcount) that those buyers found essential.
Can’t confirm that last paragraph, but the source was very well placed.
the only reason they obtained cray was to improve on current best in practice cooling methods for such large compute arrays. cray were more plumbers than engineers by all accounts. ugh cpop.
don’t forget the random choice to build a completely new campus when they didn’t even fill the existing campus leases due to interesting gerrymandering with MtV.
NUMA link was _not_ developed by Cray. It was designed by SGI before hand, but was renamed “CrayLink” to make it sound like SGI had actually gotten something of value from the Cray acquisition.
BTW – The senior engineers who went to do due diligence on the Cray acquisition said “don’t do it, there’s nothing of value there”. Management said “wrong answer”.
Your timeline is somewhat wrong. In 1995, there was no Maya, yet – it was first released in 1998. What sold the Irix Boxes were Alias Power Animator and Wavefront’s Adv. Visualizer, of which Maya was a merged Product.
One other reason for the downfall of SGi was simply, that toward the end of the nineties, you could purchase an NT BOX with a Petium and a descent Graphics card that could at least speedwise, outran any SGI BOX at a much cheaper price.
The CS6400 didn’t merely become the basis for a line of profitable Sun servers — the resulting Enterprise 10000 line did more than a billion dollars of business in its first year with Sun, and it kicked more than a few SGI Challenges and Origins out of the data center.
I was told the Tera deal actually came out to ~$65M. Many months after the deal closed, Tera had not paid…no idea if the $ was ever collected.
I agree with Greg’s comments on Sabatical. Cray employee’s got 6 weeks after the cray purchase.
They didn’t all get to take it imediately though. It was based on seniority of number of years service. those with the most years got to go first and the others got scheduled afterwards so that everyone wouldn’t take it off “the first summer”.
As for the Intergraph Purcahse, they paid $100 million to purchase a division of Intergraph that was going to be shut down. SGI paid Intergraph rent for several months to house the employees in Intergraph buildings until the refurbished space could be finished.
They had been in that new space 2-3 months when they laid all but about 5-10 of them off in a big group meeting.
The Intergraph employees weren’t terribly upset as they got HUGE severance packages based on years of service that included Intergraph years. Some got 6 months pay.
this is on top of the 6 months pay they got working for SGI before the layoff and the paid sabaticals they got.
SGI lost MILLIONS over this.
@ Yeraze
I think SGI sold Cray for something like $100million or $105 million to Tera, which changed its name to Cray
@Greg Davis Thanks for the data point. I’ve integrated it into the article.
You are wrong about the sabbatical time off for Cray people. Cray people got one 6 week sabbatical one year after SGI acquired Cray. I was one of those people.
@ lifeguard1999
SGI Sold Cray for something around $175M (Reference), after buying it for $740Million.
SGI bought Alias & WAvefront for something akin to $500M. (Reference)
How much did SGI pay for Alias Research and Wafefront Technologies, versus what they sold it for?
How much did SGI sell Cray to Tera for?