Silicon Graphics Essay Research Paper Silicon Graphics

Silicon Graphics Essay, Research Paper Silicon Graphics: Computers for 3-D Silicon Graphics, Inc. (SGI) is a manufacturer of high-end computers specifically designed for

Silicon Graphics Essay, Research Paper

Silicon Graphics: Computers for 3-D

Silicon Graphics, Inc.

(SGI) is a manufacturer of high-end computers specifically designed for

the rendering and manipulation of three-dimensional images. At a time

when computer technology has become increasingly standardized and specialized,

SGI has been described as a throwback to an earlier age of computing because

the company manufactures its own workstations, central processors and

operating software.

Although Silicon Graphics workstations are best known

for their creation of the stunning cinematic effects seen in many recent

Hollywood blockbusters, they are also the tool of choice for a wide range

of applications that require the absolute highest level of 3-D graphic

capability. Examples include flight simulation, product design, scientific

modeling, Internet graphics and gaming software. A list of SGI’s

customers include many of the world’s largest governments and corporations.

SGI’s strong growth over a period of nearly a decade

has been based on its production of successively cheaper workstations

that embody capabilities previously not available at each given price

level. The company has thus been able to create new markets for its products

by stimulating new productive applications of 3-D technology.

Although the price of SGI’s lowest-end workstations

has fallen to about $6,000, the company has chosen not to take the final

step into the highly competitive, low margin market for personal computers

(PCs). This strategy has drawn some criticism from analysts and shareholders

who question where the markets will be found to fuel the company’s

future growth. In response to these concerns (and to an associated drop

in the valuation of their stock) SGI has begun to move into some consumer

markets, producing PC-compatible software and graphics cards. At the same

time, the company continues to cater to its elite market, bringing progressively

greater levels of "supercomputer" power to its upper and mid-level


History and Founding

The success of Silicon Graphics has been built upon the

technological innovations and business instincts of co-founder Jim

Clark. Clark, a Ph.D. computer scientist, took a four-year appointment

at Stanford University for the

express purpose of developing a technology that would serve as the basis

for a start-up company. Clark left Stanford in 1982, along with some of

his colleagues and students, and founded Silicon Graphics. The company’s

objective was to produce computers that would provide greater 3-D capability

than any existing platform by obtaining more efficient use of computing


SGI’s technological success was accomplished by the

application one of Clark’s own innovations, the geometry engine (also

known as a graphics engine). The geometry engine is a method of embedding

complex algorithms for the generation of 3-D images onto the hardware

of a computer chip. The resulting architecture effectively transfers capability

from software to hardware, allowing a computer to almost instantaneously

perform complex 3-D functions that would otherwise require it to read

thousands of lines of code. SGI’s first workstations allowed engineers,

designers and artists, for the first time, to pick-up, rotate, and effectively

"walk through" complex 3-D objects on the screen in real time.

Clark’s describes his own role during the early years

of SGI as providing vision and technological knowledge. To manage the

day-to-day operation of the company, as well as to implement long term

strategy, he hired Ed

McCracken in 1984 to serve as CEO. McCracken, a former division president

at Hewlett-Packard (HP), was reportedly so

anxious to leave his previous employer that he took a very substantial

cut in salary in order to join the fledgling SGI. Although McCracken has

become known for the freewheeling and casual management style he brought

to Silicon Graphics, he has been able to take firm and immediate control

of the company’s operation and its market strategy. It was McCracken

who guided SGI’s move toward lower-priced computers, a formula that

would sustain the company’s growth for the better part of a decade.

McCracken was also responsible for negotiating a series of fruitful deals

and alliances with mega-corporations such as Time-Warner

Cable, Nippon Telephone and Telegraph,

AT&T and Nintendo.

Clark recalls that as a start-up company, Silicon Graphics

was not an overnight sensation. It took a good five years of "preaching

the gospel of 3-D graphics" before sales of SGI’s workstations

really began to take off. The company placed its first workstation on

the market in 1985, and in 1987 introduced its first model with RISC (Reduced

Instruction Set Computer) chip technology. RISC is a unique architecture

that reduces chip complexity, significantly adding to the efficiency of

SGI workstations. The RISC chip used by SGI was manufactured by MIPS Computer

systems. SGI purchased MIPS in 1992, and has manufactured its own RISC

chip since that time.

Almost immediately following the release of SGI’s

first RISC-based system, it was adopted by the US military for the graphic

simulation of weapon trajectories. Within a short time, many of the world’s

most advanced research and design units had discovered SGI technology.

British Aerospace and NASA, for example, use SGI workstations for product

design and flight simulation. Boeing Aircraft used SGI technology to essentially

"walk through" the on-screen plans for their new 777 aircraft,

achieving tolerances of less than a 1000th of an inch without paper plans.

Volkswagen is one of several automobile manufacturers to make similar

use of SGI workstations to design its automobiles, as well as to design

the process by which they are built.

Beginning in about 1988, when SGI began to place lower-end

workstations on the market, the company began a period of steady growth

of about 40 percent per year that lasted until the middle of 1995. By

then SGI’s annual revenues were in excess of $2 billion, and the

company employed more than 7,000 worldwide.

Clark resigned in 1994 to found Netscape with Marc

Andreessen. McCracken remains as chief executive to guide Silicon

Graphics at a time when intense competition, not the least of which comes

from his former employer HP, has begun to erode SGI’s market share

and threaten the company’s growth.

Hollywood Meets SGI

The best known of SGI’s customers have been the companies

that specialize in the production of 3-D effects for the Hollywood film

industry. In the early 1990s, film makers who often spent millions of

dollars on special effects that used extravagant models and stop-action

animation discovered what SGI’s 3-D technology could do. The result

of SGI’s encounter with Hollywood has been the kind of eye-popping

effects that were first seen in Jurassic

Park, and then in a string of blockbusters including Terminator

II, Star Trek, True

Lies, Batman

Forever, Casper

and Toy

Story. The technology behind 3-D effects can be as complex and

demanding as the most sophisticated industrial or research applications.

The computer generated ghost in Casper, for example, required storage

of 27 trillion bytes of data. At the level of capability required to execute

such programs, SGI has no equals. Therefore, the top 3-D effects production

firms in Hollywood and Silicon Valley rely almost exclusively on SGI workstations.

In mid 1995, SGI entered into agreements with Lucasfilm’s

Industrial Light and Magic (ILM) and with Stephen

Spielberg’s, Jeffrey Katzenberg’s and David Geffen’s Dreamworks

to jointly develop systems to be used for computer animation. By 1996,

between 15 and 20 percent of SGI’s sales came from Hollywood and

the animation industry.

Strategy for Continuing Growth

In accordance with the vision of company founder Jim Clark,

and with the concrete strategy executed by Jim McCracken, SGI has succeeded

over the years in making advanced 3-D technology available at an increasingly

low price. This strategy has allowed the company to sustain a high level

of growth for nearly a decade by bringing a high level of 3-D capability

to institutions that could not have previously afforded it. But in spite

of Clark’s one-time ambition to ultimately move into the PC and home

market, SGI has elected to stay with its elite, high-margin niche. This

has caused some concern among shareholders that SGI will not be able to

find the new markets that will be required to sustain growth in an increasingly

competitive industry. Beginning around the third quarter of 1995, SGI’s

40% per year growth began to slow appreciably in the face of sharp competition.

Because SGI’s chip and architecture are specifically

geared toward 3-D application, its workstations will continue for some

time to offer 3-D capability superior to any found on general purpose

systems. In recent years, however, competitors have begun to offer very

high levels of 3-D capability for a fraction of the cost of even SGI’s

lowest-end workstations. Most PCs now come equipped with advanced 3-D

graphics. At the middle performance level, the two largest manufacturers

of high-end workstations, Hewlett Packard and Sun

Microsystems, are taking direct aim at SGI’s high-margin business.

By stacking two or four Pentium Pro chips in one PC and using relatively

cheap software based on Windows

NT, their newest systems deliver sufficient capacity to provide a

viable alternative for SGI machines costing five times as much.

In short, Although SGI remains unsurpassed at almost every

level of 3-D computing, competitors are closing the gap at the low and

middle levels by offering products that come progressively closer to SGI

quality for a fraction of the price. Even SGI’s most noted customers

in Hollywood have told sources they are looking into these alternatives

for at least some applications. Some industry experts expect the Windows

NT/Pentium Pro machines to continue to narrow the performance gap, leaving

Silicon Graphics with a shrinking niche market of those users who need

the most advanced graphics capabilities and can afford to pay for it.

Among those who question SGI’s long-term growth potential is company

co-founder and former chairman, Jim. Clark. In Clark’s words, "they

can own the high-end of the market — it just isn’t a very exciting

place to be."

In an effort to find new growth markets, SGI has initiated

some forays into consumer markets. The company has formed a consumer products

division to build and sell new lines of PC-compatible graphics boards

and software, as well as to attempt to build on the success of its Nintendo

64 game machine. At the higher levels of its market, SGI continues to

provide more for less to its big institutional customers.

Most significant in the latter respect has been SGI’s

purchase of Cray Research, the world’s

leading manufacturer of supercomputers, for $767 million. Prior to the

merger, the two companies together owned almost half of the $2 billion

scientific and engineering market. SGI hopes economies of scale and the

melding of the two company’s technologies will help lower the cost

of supercomputing power, enabling the company to broaden its market for

mid-level professional applications. Although company spokesmen do not

expect to realize the full benefits from the integration of the technological

standards of the two companies until around the turn of the century, SGI

has already used Cray’s crossbar switch technology — a system that

facilities rapid connections between memory, central processors, graphics

devices and peripherals — to increase the performance of their new midrange

Octane workstations. At the same time SGI is slashing the prices of their

low-end O2 systems, which have become the fastest-selling products in

the company’s history.

Supercomputers like the Origin 2000, only recently believed

to be an endangered species, are presently finding new markets at universities,

in manufacturing such as applications for automobile and aerospace plants,

in oil and gas exploration, and in weather forecasting. The rapid growth

of Asian economies has created an additional market for many of these

applications. SGI and its Cray subsidiary maintain a firm hold on their

share of the highest-end supercomputer market. The company has recently

sold three Cray systems to the Department of Defense Naval

Oceanographic Office, and in October of 1996 sold what was then the

world’s most powerful supercomputer to Los Alamos National Laboratory,

where it will be used to develop a simulated substitute for underground

nuclear testing.

SGI has additionally built an emerging business providing

computers to be used as servers for corporate intranets. In the rapidly

growing intranet market, the company expects to gain a significant advantage

during the next few years from the integration of Cray’s parallel

processing technology.


Following a decade of constant innovation and growth,

Silicon Graphics continues to produce some of the world’s most advanced

computers in every category except that of the personal computer.

Having committed the greater part of its resources to

continued domination of the high end of computing, SGI’s success

in the coming years depends not only on staying ahead of its competition,

but also on the power of the global economy to find new uses and needs

for the power premium SGI’s high-level workstations offer. Considering

the rate at which technologies have been developed and put to use in recent

years, this seems a plausible, if not a certain, scenario.


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