SGI Emerges Lean, Focused and Ready to Grow

On May 8 of this year, SGI began the grueling work of recreating itself.

And in fewer than six months, it's already done. Say hello to the New SGI. As SGI emerged from Chapter 11 on October 17, it was immediately clear to all that SGI's transformation has been profound, its new executive team leaving no part of the organization untouched. The company has:

• Re-engineered the SGI business model around customer needs and workflows;
• Strengthened its product and solutions, creating the most competitive offering in years;
• Installed a new management team fully accountable to meeting company objectives;
• Installed a new Board of Directors;
• Achieved annualized cost savings of $150 million; and
• Recapitalized the company, eliminating long-term debt and arming it with $115 million in exit financing and a balanced operating budget.

The New SGI, notes SGI CEO Dennis McKenna, is a leaner and more competitive market force.

"The New SGI is an efficient and fully recapitalized company," says McKenna. "It is armed with a revamped, market-centric business model and empowered by a rekindled devotion to solving the problems of customers in a targeted range of markets."

The dramatic changes, says McKenna, are the result of a team effort. "In these past six months, everyone at SGI has worked intensely to remake the organization into one engineered for growth and stability, with innovative new products targeting the largest market opportunities in the history of the company.

An $80 Billion Opportunity
As it emerges from Chapter 11, SGI is bringing competitive new server, storage and services solutions to a combined addressable market that annually invests more than $80 billion in technology. In an environment where customers are seeking more comprehensive solutions that can serve as platforms for a variety of applications, the new offerings allow SGI to mean more to customers than ever before.

"We have a more expansive product line today," explains McKenna. "So for the first time, we can address up to 80 percent of a customer's total technology spend. This is the absolute inverse of the old SGI, where in many cases our products were targeted at only 20 percent of a customer's overall IT investment. We needed to have a much deeper reach into the customer organization, and now we do."

Meanwhile, SGI has refined its focus to deliver "innovation for results" to its traditional high-performance computing customers in the defense and intelligence, sciences, and engineering analysis markets, as well as expanding into new defined areas within enterprise data management.

Fueling the more aggressive market focus is the most competitive SGI product line ever seen. Even during its reorganization, SGI aggressively pushed forward a product roadmap that has resulted in new, more powerful offerings. The company introduced the new SGI® Altix® XE line of x86-64-based servers and clusters running dual-core Intel® Xeon® processors; new pre-integrated solution bundles that will literally transform the notion of Linux® cluster computing in technical and enterprise markets; powerful and flexible dual-core SGI® Altix® 450 and 4700 blade servers running the latest Intel® Itanium® 2 processors; and new SGI® InfiniteStorage NAS and SAN systems.

The broad range of SGI solutions is designed to accommodate existing customer workflows while helping organizations manage data that is doubling in volume every 9 to 12 months.

"SGI is known for providing technological leadership and innovation in the high-end server and cluster market," said Gerry Kolosvary, founder, FedCentric, an SGI government reseller that supports the mission-critical applications, infrastructure and professional services requirements of the Department of Defense, intelligence community, Department of Homeland Security and federal law enforcement agencies. FedCentric recently secured SGI® Altix® 4700 and SGI® InfiniteStorage systems for some of its customers.

"With SGI's improved financial structure and a strong portfolio of Itanium- and Xeon- based Altix products and storage systems," adds Kolosvary, "we see a larger opportunity to address the challenges within data growth in government sectors."

Expanding Focus: Enterprise Data Management
As it redoubles its focus on solving problems for customers in its core technical markets, the new SGI business model - and its expanded potential within new and existing customer organizations - is built in part around solutions that help enterprises address the data explosion underway within companies worldwide.

Rapidly growing data has prompted enterprises to seek out system architectures originally designed for high-performance computing (HPC) applications. But most enterprise solution vendors, which have historically designed systems to meet transaction processing needs, lack the products customers require to manage rapid data growth. These competing enterprise products virtually ignore the two most vexing bottlenecks in the BI workflow: data warehouse and ETL (extract, transform and load) performance.

The SGI high-performance server and storage architecture obliterates both of these bottlenecks at a fraction of the cost of competing solutions. SGI's dual-core servers, scalable storage and experienced services offerings combine to provide cost-effective, scalable workflow solutions to achieve real-time data warehouse implementations, right-time ETL environments, server consolidation, data mining and analytics, and digital media archiving and content management.

The SGI advantage is attracting customers worldwide. For example, MTU Aero Engines, Germany's leading manufacturer of aero engines, engine modules and components, is migrating its mySAP Supply Chain Management (SCM) system landscape from a proprietary platform to SGI Altix servers. "Our computing needs have far outpaced the capabilities of most enterprise platforms, which are designed primarily for transaction processing," notes Erwin Pignitter, CIO at MTU Aero Engines. "SGI's latest product line addresses our growing needs by providing an advanced and reliable 64-bit Linux environment, a scalable system architecture, and standards-based components. We have committed our MySAP SCM system to reliable SGI Altix."

A New Direction
To help chart its new direction, SGI also has appointed a new Board of Directors. Joining the Board will be Eugene I. Davis, chairman and CEO of PIRINATE Consulting Group, LLC, and Anthony Grillo, founder and CEO of American Securities Advisors, LLC; both seasoned executives with extensive board and financial experience in restructuring. Kevin Katari, managing member of Watershed Asset Management, LLC, and Chun Won Yi, associate for Quadrangle Group LLC, will also join the Board and represent the new investors in the Company. Two existing directors - SGI CEO Dennis McKenna and James A. McDivitt, former astronaut and retired senior vice president of Government Operations and International of Rockwell International Corporation - will remain on the board.

Though the company has emerged from Chapter 11, McKenna is quick to point out that the work is far from finished.

"We still have considerable work ahead in implementing our growth initiatives, but we are focused on Innovation for Results," notes McKenna.

"Without doubt, this is a new day for SGI."