Silicon Graphics Inc has warned that its September quarter will be disappointing, and Merrill Lynch & Co has a question mark over the performance of the likes of Data General Corp, IBM Corp and NCR Corp in the same period. It figures EMC Corp, Lexmark International Group Inc, Stratus Computer Inc and Unisys Corp will be among the best performers and believes that overall Unix server demand remains strong, being driven by OLTP and data warehouse applications. It says spending on client-server software to fix Year 2000 problems is helping drive sales. Steve Milunovich is expecting SGI’s revenue to come in flat on last year at around $760m for the quarter and attributes the shortfall to sales and marketing, believing manufacturing to have executed its plan. He says the Origin server business grew around 15% where the company is looking for sales in the 30% to 40% range to maintain growth, that the US fell behind targets although international operations met their goals, government spending at the end of the quarter was lower than usual and the company is having a hard time breaking into markets outside of its traditional sector. His inkling is that management changes may be required. SGI has already lost its high-end marketing head Willy Shih to Eastman Kodak Co. Sales of the new low-end O2 workstations were light and Milunovich thinks the company’s plan to offer Windows NT workstation in a year pretty much says the low-end jig is up. Merrill Lynch figured SGI would put together a few good quarters based on backlog, product cycle, and more discipline, but it did not. The problem is that the clock is ticking. The company has already frittered away two years to good Unix demand. Now NT is moving up, Cray is declining, and SGI needs to move into commercial servers. Although the embracing of NT at the low end is pragmatic, it also underscores that the company is between a rock and a hard place.
