SGI Looks to Jump Chapter

McKenna Masterplan holds the key to the troubled vendor's future

May 11, 2006

2 Min Read
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7:00 PM -- The next few weeks and months will be a critical time for SGI, which filed for Chapter 11 bankruptcy protection earlier this week, prompting speculation that the troubled firm would make an ideal acquisition target. (See SGI Opens Chapter 11.)

But Dennis McKenna, SGI's CEO, says the firm is not in the shop window. On the contrary, the vendor is planning to fill out its product line as it claws its way back to profitability. "We have no activities underway relative to M&A right now," he told me this week, adding that new offerings are planned for the summer. "In addition to our high-end server products, we will have a lineup of midrange server products."

Storage, which currently accounts for just 15 percent of SGI's overall business, is also uppermost in McKenna's mind, and the exec is looking to increase this figure to 25 percent next year. (See SGI Delivers InfiniteStorage, SGI Sets New Standard, and SGI Adds 4-Gbit/s FC.) This, he says, will be achieved by increasing the amount of storage sold with SGI servers and attacking new parts of the enterprise market. McKenna, however, will not reveal his masterplan until the July timeframe.

Despite McKenna's "business as usual" message and positive outlook (how else do you expect him to describe the company's plight?), the fact remains that he has got plenty of work to do. For one thing, SGI's woes must be music to the ears of enterprise competitors like HP, IBM, and Sun.

Internally, McKenna also needs to make sense of SGI's financial mess, which is rooted in debts dating back to the 90s. This, however, could be easier said than done, particularly given SGI's poor numbers in its preliminary third-quarter results. (See SGI Opens Chapter 11.)But the decision to file for Chapter 11 may just have bought McKenna that most valuable of all business commodities -- time. What's more, it will be interesting to see how growing storage will advance the CEO's goal to get SGI into operating in a "neutral" to "slightly profitable" state by the end of this year.

James Rogers, Senior Editor, Byte and Switch

Organizations mentioned in this article:

  • Hewlett-Packard Co. (NYSE: HPQ)

  • IBM Corp. (NYSE: IBM)

  • SGI

  • Sun Microsystems Inc.

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