Silicon Graphics To Be Delisted From NYSE

Dan Linder writes "Starting Monday, November 7th, Silicon Graphics will be delisted from the NYSE. The future of the graphics and supercomputing former-heavyweight has never been less certain. This is especially unfortunate given their ongoing commitment to Linux and other open-source projects." From the article: "The company's stock, which once traded at $50 per share, fell below NYSE's minimum standard for continued listing earlier this year. The move comes as little surprise. The company received a warning from the NYSE in May, when its share price dropped below the $1 barrier. Although it had dipped into sub-$1 territory in late 2001 and again in late 2002, the price on both occasions recovered within a month or two. "

Too bad about SGI

They were great machines in the day. It was really easy to grab video with them back 10 years ago when other machines were such a pain to work with. Too bad they couldn't adapt to the changes of the computing world.

Re:Too bad about SGI

The Linux kernel reaches 128 CPU's just because of SGI. So, it's not as easy as you think. Also, there's the hardware to consider. Opterons aren't up to 32 yet, they are hoping that the new 3rd-party chipset will work well with that

NASDAQ?

Can't they list on the NASDAQ? The NASDAQ requirements should be a better fit.

Re:NASDAQ?

Nope. You can't be under $1.00/share on NASDAQ for more than a month without being delisted.

Consequences of delisting?

What are the consequences of delisting? Less access to raise capital by issuing new shares? Was that really gonna happen with their current financial situation, anyway?

Re:Consequences of delisting?

Once they have delisted, yes it will become harder to raise more capital. The bigger issue I think though is that the analysts do not look fondly on a stock that drops off of an exchange. The investing public's opinion will fall drastically and, as a result, the confidence in them will be basically gone. The ability to raise any form of capital (through equity or debt) will be very restricted and there is a likelihood that other companies with receivables out with them will come knocking for their money.

Re:Consequences of delisting?

You missed one of the biggest factors, many mutual funds and institutions (e.g., retirement/pension investors) generally have rules which prohibit them from investing in OTC stocks with low market cap (share price * shares). This is why a reverse split doesn't help, it may increase the share price, but of course reduce the number of shares.

Mutual funds and institutional investors are highly desired as they tend to be stable stock holders which can reduce the volatility of a stock (once they decide to invest they hold large chunks of companies and hold them for a while to increase tax efficiency). Once you get into the open market, you get hedge funds, insiders, and day-traders manipulating your stock price which can cause other investors to flee for the woods.

They also haven't had any analysts covering them since the beginning of this year (nobody likes to cover OTC or penny stocks).

Moving to an OTC (over the counter) market means that there are only a couple brokers making a market in the stock and price reporting is really up to them to perform on a timely basis. This means your broker (unless they are the ones making the market in the stock) really has to try to find a buyer for any stock to you want to sell or will have to pay the market maker a fee and/or be subject to the price they report. In a "listed" stock there generally are several big brokerages that match buyers with sellers and with a big exchange like NYSE enough shares are traded on the floor to create a more continuous range of prices and fast execution of any retail sized trader order. As the price continues to fall, the OTC market maker gives up and demote the stock to the "pink sheets" where sales are reported on paper reports as trades occur. Then the stock isn't very liquid at all and the daily or weekly price report is fairly worthless as an indicator of the worth of the stock.

The long and the short of it is that this means giving stock options to the employees or the executives is really not very meaningful anymore (anytime they sell, they don't have a good idea of the price they will get and more likely they will "heisenberg" the stock because if they sell the price is likely to go down) meaning it's hard to motivate employees and executives with either their existing or any new stock options or grants. Companies like SGI are all about employees, the assets are basically worthless to the investors w/o the employees. Unable to motivate them with stock/ownership, they have to pay them more (e.g. bonuses), or likely suffer attrition.

It's a downward death spiral that almost no company can get out of. For example, SGI has already had to pledge assets (e.g., patents, trademarks, etc.) to get their latest operating loan. In bankrupcy this puts these new lenders in a primary position and the normal equity/stock holders and current bond holders in an inferior position making it less likely for people to invest in the stock (equity holders are the last to get paid back in a bankrupcy). This is what makes it hard to raise any captial, except by heavily mortgaging thier assets even further to the lenders.

Once one of the lenders decides that the company assets are worth more than the company itself it often just rips the company apart for a fire sale to an army of lawyers who snap up patents at fire sales in order to shake down large companies for a few quick bucks. It's a sad, sad day when that happens.

More coverage on this breaking news story:

For another inside look at SGI's delisting, see also yesterday's article on sister site Slashdot [slashdot.org] (disclosure: Slashdot and Slashdot are both part of OSTG). Writes contributor ScuttleMonkey: "SGI, the former darling of the high-tech world, has been in trouble for a while [slashdot.org], perhaps this is really the end."

Too ahead of it's time?

SGI put out some increadibly cool technologies:

OpenGL [opengl.org] - a very important 3D API

The Standard Template Library [sgi.com]

VRML [web3d.org] which gave rise to X3D Open [coin3d.org] Inventor [tgs.com] which is a C++ wrapper around OpenGL.

Pretty purple boxen that were great in their day.

It seems that these came out years before the average user could really leverage them - years before anyone (including SGI it seems) knew what to do with them.

It seems a shame that such a brilliant company could have such a hard time making money. They made the world a better place though, IMHO.

Re:Too ahead of it's time?

They made the world a better place though, IMHO.

They made the OSS world a better place, at least. SGI is putting lots of resources in OSS software [sgi.com]. They gave us things like XFS. Their engineers are part of the group of programmers who made (and are still making right now with patches being merged in each release) possible to make linux scalable in big SMP boxes (ie: their 512-CPU boxes). They gave us things like GLX [sgi.com] (the opengl xservers glue)

Linux users owe SGI a lot. They're still not dead though, I hope they find a way to make SGI profitable again...

Re:Too ahead of it's time?

"It seems a shame that such a brilliant company could have such a hard time making money. They made the world a better place though, IMHO."

SGI machines are being replaced with cheap x86 clusters running Linux. In the race for GNU domination is this a case of friendly fire?

Re:STL from SGI?

Alexander Stepanov went onto SGI after HP and continued his work with implementing and extending the STL while there. It improved many implementation details (the HP version was not thread safe for example), as well as adding several templates (hash'es etc) that did not get into the standard for political reasons. Like the HP version, the SGI code was freely available (BSD-like license).

The SGI implementation of STL has pretty much become the defacto-standard implementation. It is definately the most widely used implementation in the open source world and probably in the proprietary world as well.

On a related note, this is a pretty interesting interview [stlport.org] with Stepanov.

Terrible management

I have followed SGI's stock and conference calls very closely since 2001.. I have also Extensively used their product since 1993. I've made a lot of money trading the pops in the stock but those days seem over and the risk is too high.

They've had the Same CEO for 7 years. He is also the Chairman of the board. That makes it difficult for the board to remove him. The board should be sued. The executives should be sued. It is sad to watch those assclowns run the company into the ground. Their is no sense of urgency and there never has been.

No executives have been fired. Heads are rolling at Dell because of a single bad quarter. It is like that at most successful companies.. but not SGI..

On October 25, they had their quarterly CON call.. The CEO didn't even mention the impending delisting.. I figure he had to know that it would be announced to the public by the NYSE within days.

The story of SGI is that the best tech doesn't always win (though it is a bit hard to say that with Itanic in the picture).

Re:Terrible management

Heads are rolling at Dell because of a single bad quarter. It is like that at most successful companies..

Yes you can always tell how good a job someone is doing in 3 months. That's the recipe for short term thinking and arguably what is wrong with most publicly traded companies.

What do they have going for them?

SGI made some great machines both in the form of the hardware and the looks [sgi.com] of the hardware. They also provided us with the likes of OpenGL.

The problem is that the market they once had, being high-end graphics workstations, is being eaten up by cheap MS-Windows based systems. They could try redefining themselves, but I not sure what form it could take. While their version of Unix had some nice additions, it was never really a selling point. Their cheapest systems start off at $9000, which more expensive than Apple, and they also have less technology diversity than a company like IBM to help buffer any slow growth of their hardware. Maybe if they offered a very capable $4000 machine, it might help them attract people who might have never considered them before?

BTW CATIA, which is a very important piece of CAD-CAM software in the automotive and aeronautical industry is actually Windows centric, so they benefits of a SGI machine there is zero.

Re:What do they have going for them?

A few years back, a group of SGI employees approached the management with the idea of a graphics chip that could be made cheaply enough to be sold for gaming and low-end CAD-type things for going in PCs. It would be slower than the rest of the SGI products, but `good enough' for a lot of their potential customers.

Management decided not to pursue this - they didn't want to cannibalise their workstation sales. The employees shrugged, left, and set up a new company of their own - you may have heard of it, it is called nVidia.

The moral of this story? Never avoid creating a market just to avoid destroying your existing market. If you do, then you will find that you have a competitor who wasn't even in your original market.

What happened ti IRIX?

When I read the comment about the commitement of SGI to linux, I couldn't help but think of Sun which gets a lot of bashing because they insist on Solaris instead of commiting itself to linux. Now, SGI's future is uncertain although they "commited" to the supposedly right choice.

IMHO Irix was great and they should commit to their own child. Who knows, today we might had yet another choice if they did.

Re:What happened to IRIX?

SGI definitely would not be in better shape if they'd stayed with Irix. Irix is, internally, quite difficult to port to new architectures. In particular, changing it from big endian (MIPS) to little endian (IA64) would have been a challenge, at best. Even moving it to another 64 bit big endian platform (the Cray X1) took awhile. It also has other "issues" like a somewhat outdated IP stack (though SGI may have fixed that also).

SGI's problem is that they've made way too many mistakes and missed too many boats. They should have released a PC graphics card in the mid 90's. Instead, that group went to nVidia. They should have allowed Cray (who they owned) to continue with the (quite successful) T3E line. Instead they pushed Origin which, at the time, was barely working. They should never have built a PC that didn't have a standard BIOS and couldn't run a standard version of Windows. They should have never built PC's, period. They should have not tried to commit to shipping Windows on every platform they built (this was a late 90's thing which, fortunately, died). They should have actually used the people and technology that they bought when they bought Cray. Instead, it took 6 years of political infighting before the companies were really merged (a large part of what was Cray Research is still part of SGI). They should have put effort into stabalizing and securing Irix back in the mid 90's when it was swiss cheese. They *owned* the webserver market at one point. Sun anhialated them. They shouldn't have sold the Cray SuperServer to Sun for $56 million. It became the Sun Ultra Enterprise and Sun has made billions on it. Lastly, and possibly most importantly, they shouldn't have driven off their best employees because of poltical infighting and starting, but not finishing, far too many projects.

You can't make that many *major* errors and stay alive. Honestly, I'm surprised they've managed to last as long as they have. I thought they were dead 4 years ago when I quit.

Art vs Technology

IMHO its a shame because SGI have always been visionaries in computing architecture, and if you look at a modern PC alot of what it is doing for the 'first' time was done years ago by SGI. I think I'm right in saying that many of the people working for ATi/Nvidia/Microsoft etc. are ex SGI guys and have carried the seeds of great ideas to places that are perhaps better at executing commercial designs.

I'll be sad to see SGI go because they've never seemed as tied to consumer demands and as such look to be a place where elegant/correct designs are valued over whatever can be thrown together in six months and stamped out on a production line to make some quick bucks.

Perhaps I'm just getting older but it seems like a modern version of an older problem, namely that we no longer value artisans. We value mass production and whats cheap, we live in carbon copy houses (watch MTV cribs for a few minutes) and buy the same mass produced items. Though there are some inklings that we are starting to get fed up of it with more people these days focusing on individual fashion and customising everything to their own tastes. What were really saying is we want something unique/crafted/personal just look at all the case modding going on.

Sadly by the time we value something it can be lost for good, many old techniques have been lost over the ages only for modern historians to bemoan and endeavour to recover. And even if we can flawlessly record the techniques used does that prevent them dying out, I'm thinking of bruce lee recording the techniques he used or a japanese sword maker recording his techniques. When not practiced these techniques become 'sterile' and are much better passed on to an apprentice. Maybe it doesn't matter if these techniques die out after all who needs japanese swords and martial arts? Though you can't help feeling the world is a poorer place without them.

I don't know I could be way off the mark and if so I'm sure someone will shortly correct me, but I for one would be sad to see SGI go (looks around and steps down off soapbox wondering how he got up here).

The story of SGI is the greatest story of...

...incompetence ever told. It's astonishing that a company that made the best computers in the world for 3D graphics can have fared so badly in a world where even your cell phone is a computer supporting 3D graphics. They had the world handed to them on a plate and they simply threw their hands in the air, the plate with it. Astonishing. And so depressing. I'd really ike to try to understand how the likes of nvidia took the laurel from them. I remember nvidia's very first '3D' card (you probably never saw it, I helped develop drivers for it many many years ago). It was the biggest pile of crap ever developed. Never in a million years would I guess that a few years later these guys would be blowing away SGI and hiring half of their staff.

Re:The story of SGI is the greatest story of...

You are certainly right about the level of incompetence, but in some ways it even goes beyond incompetence, to what almost seemed like a willful destruction of the company by Richard E. Belluzzo. During his tenure at the helm of SGI, they made several decisions that doomed the company to ultimate failure. The first and foremost being that Silicon Graphics would change its name to SGI, stop focusing on graphics, and focus on internet and database servers. The next suicidal decision was that SGI would dump a lot of money into porting their flagship software graphics software (Maya) to Windows. The most crippling blow was that since they were no longer focusing on graphics, they would actively lobby a PC card manufacturer (Nvidia) to hire their engineering staff, and sell them their IP. Then they decided that they would abandon their own OS, and instead make components of their OS available to the Open Source community and put out machines with Linux and Windows. By the time SGI workstations were just PCs running Windows, using Nvidia graphics cards, it was clear the company was dead.

Of course, after making all these ruinous decisions, Belluzzo immediately quit to take a job at Microsoft. I have never been able to figure out if his job at MS was his reward for scuttling SGI, or if after what he did at SGI, MS was the only company that would hire him! Either way, it was SGI itself (under Belluzzo's leadership) that opened the door for Microsoft to walk into the high-end 3D market. Before Maya was ported to Windows, and before Nvidia came out with their Quadro cards, the idea of doing film-quality animation on a PC (while possible) was not taken seriously by anyone in the industry. 90% of the production tools were SGI-only programs written for Irix.

All in all, I think the market is probably better for it, since now you can buy a $100 motherboard using SGI's crossbar architecture (now called the Nvidia Hypertransport), and $300 graphics cards using SGI graphics processors, instead of having to shell out $10,000 for a workstation. None the less, it is a coffin SGI made for itself.

Re:The story of SGI is the greatest story of...

The first time I ever heard about Hypertransport (long before it was available on any motherboards) it was from a friend of mine who works on drivers at AMD. His exact words were "you are going to be happy, the upcoming Nvidia motherboard is going to use the same architecture as your O2."

I asked him "they are putting a crossbar in a PC motherboard?"

He responded "they are calling it hypertransport, but it is the exact same thing. We have been working with them on it, and it is going to be the center of their new Nforce boards."

All press releases aside, AMD was well aware of the SGI crossbar, and Nvidia had the rights to the technology to make it happen on a PC.

As far as the Nvidia cards go, of course they are original designs. I'm not saying they aren't. However, they are original cards being designed by ex-SGI engineers, with access to over a decade of SGI graphics research. Just look at the huge difference between the TNT line of cards (before they acquired SGI's resources) and the Geforce/Quadro line of cards (after they acquired SGI's resources).

I Owe My Career To SGI

A while back, I had to change careers. The bottom fell out of the market for what I was doing before (audio engineering). I was able to take my UNIX skills and pick up a new career where I left off.

About 15 years ago, I was living in Germany working at a post production studio. The graphics department used SGI hardware along with some amazing software. One Friday evening, as I was finishing up and about to go home, someone stuck their head in the control room where I was cutting some ADR for a film (German voices to replace the English). They asked me if I spoke English. Having lived in the US for about 18 years prior to that, I was able to say I was extremely comfortable with the language. Luckily, I also could speak some "tech". SGI's office was closed for the weekend, and they didn't know how to get any other tech support. I sat down with the manual (in English) and fixed the problem with the machine. From then on, I was hooked.

I started learning about all sorts of UNIX-like systems, but SGI is what saved me. When the bottom dropped out of the market, I was able to take my skills in UNIX and experience with SGI systems (albeit in broadcast facilities), and get a job working as a contractor at the NIH on a project where they had about 10 SGI systems ranging from an Origin 3400 to a little O2. I even have an O2 at home on my network there just so I could break it there before I screwed it up at work. =-)

I've been watching this Titanic go down for several years. It has been a long slow death. Now, I hope someone like Apple picks them up and uses their technologies to help better their own products. I'd love to see the Apple Store with a new listing next to the Xserve; the Gserve. 512 POWER5 (yeah yeah...Intel, blah blah) processors, massive disk array, and three steps to get it working:

1. Deploy it in your server room.

2. ????

3. Arrrrrrrrrrgh...I can't do it!!!

Seriously, I'd love to see something like this. It could really help to boost Apple and keep the "legend" of SGI around for a long time to come.

I wonder if I should be scooping up some SGI stock about now so I can sell it to Apple for the buyout. Now, where did I put that crystal ball?

Re:reverse split

Reverse splits are not done on the NYSE, only on NASDAQ and maybe some other markets outside the US. This goes back to the great crash in 1929, when everyone was doing this, and it caused a lot of confusion about what the stock was worth. Antiquated rule though.

Re:reverse split

The NYSE charges a fee for reverse splits, but it can be done. The problem with reverse splits to avoid delisting is it's a very temporary measure, as stock prices will often fall even faster after a split. Many companies have tried reverse splits to prop up stock price only to be delisted anyway because the price quickly fell below $1 again.