Monday, May 08, 2006

Going, going gone...Silicon Graphics enters Chapter 11

Silicon Graphics, the once hot competitor to Sun Microsystems in the market for web servers, has finally bit the dust and declared Chapter 11 bankruptcy. Dennis P. McKenna, the recently appointed chairman and chief executive, has announced that this will help finally turn Silicon Graphics around, but you have to wonder 'what for?'.

I can well see the company and what's left of it's management pulling off a financial turnaround by largely swapping debt for equity - but cannot for the life of me see how they can grow significantly out the other end. For the trend to commoditised servers and web software that buried them in the first place has only got stronger. Even Sun Microsystems is reeling from it.

And with a mere $500M annual revenue run rate left in the company and it's products all that remains is an extremely niche provider of systems to Hollywood. This in itself is not a market to sneer at - but one that others can deliver for increasingly (with cheaper and more open systems), Apple in particular.

I feel sorry for their 1,800 employees, customers and shareholders. I guess the only hope they have for the future is to sell out to someone who at least wants to get hold of their customer relationships. And with digitization of video and rapid deployment of broadband, the film industry is a good one to deliver systems for.

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