SGI’s NT Focus Hurt Them Long Term

sgicSilicon Graphics Inc. is hoping to ride on the coattails of Windows NT to win its MIPS RISC architecture a prominent spot on the PC landscape.

According to President and CEO Edward McCracken, SGI’s strategy will be to encourage PC makers to adopt MIPS technology to distinguish their NT systems from those based on Intel Corp. processors. The proposed payoff: As NT’s market share grows, the stake in MIPS systems will increase, as will SGI’s influence in the systems business, SGI officials said.

“If NT moves beyond a niche operating system, I believe the MIPS architecture will become the most pervasive RISC architecture in the world and may over the long term — in five or 10 years — move in the position of competing in volume with Intel,” McCracken said. SGI purchased MIPS, now called MIPS Technologies Inc. of Mountain View, Calif., last June, and annual revenues for the combined firm near $1 billion.

Hopes to triple sales

McCracken’s goal is for annual sales of MIPS’ RISC chips to grow from the current 300,000 to 1 million units by 1995. Although many of those chips will be sold in embedded systems, McCracken said he believes the bulk of the growth will come as a result of MIPS’ link with NT, due out this spring.

Analysts, however, are skeptical that SGI’s plan can achieve these lofty ambitions. Microsoft Corp. has pledged to make NT run on MIPS’ 64-bit microprocessors, which will allow software vendors to recompile Intel-based NT applications for the MIPS platform. However, SGI will have trouble convincing both hardware and software vendors to expend the effort, analysts said.

“It’s the classic chicken-and-egg situation,” said Jonathan Yarmis, vice president and service director for Gartner Group Inc., a market-research firm in Stamford, Conn. Hardware providers will want to wait until software vendors make a commitment to the MIPS platform, while software suppliers will opt to sit tight until the hardware vendors commit, he said. In contrast, Yarmis said Intel “doesn’t need to convince someone to be first.”

“Intel is a safe bet,” agreed Dave Becker, manager of systems product marketing for Wyse Technology, a San Jose, Calif., company building multiprocessing systems that will run NT.

More important than NT support, SGI needs backing from powerful allies in order for the MIPS chip to gain steam, said Ken Lowe, an analyst at Dataquest Inc., a San Jose, Calif., market-research firm. Lowe predicts that only 780,000 MIPS chips will ship in 1996, compared with 5 million PowerPC processors, which have the backing of IBM, Apple Computer Inc. and Motorola Inc. That same year, Intel will ship 45 million 386 and higher-class microprocessors, he projected.

MIPS is doing what it can to convince PC makers to come on board. Last month, with Microsoft’s show of support, MIPS officials announced a resource center, which will sell design kits to hardware vendors interested in the MIPS technology. (See story, Page 23.)

That tactic harkens back to a strategy laid out in the Advanced Computing Environment (ACE) initiative, a consortium formed in 1991 to develop standard workstations based on Intel and MIPS chips. When the initiative crumbled last year, in part under the weight of infighting, MIPS lost an important channel to PC makers.

“The creation of MIPS-based NT systems fulfills the promise of ACE,” said Carl Stork, director of systems marketing at Microsoft, of Redmond, Wash. “Our commitment and confidence in the MIPS architecture remains unflagging.” Stork, however, acknowledged that Microsoft is willing to work with any microprocessor maker interested in NT.

Unlike Digital Equipment Corp., another RISC competitor making similar claims for its Alpha processor, pricing on the MIPS chip should be tempered by the fact that MIPS has six licensees churning out processor chips; DEC is the sole producer of Alpha.

So far, only one PC maker — Acer America Inc. of San Jose, Calif. — has committed to build a MIPS-based NT machine. This is not nearly enough, analysts said, because SGI needs to draw others to keep microprocessor prices down and, more importantly, fund future versions of the MIPS chip, which lies at the heart of its own workstation and supercomputer line.

“I don’t think the MIPS architecture has much of a chance in the systems market outside of SGI unless they are able to capitalize on NT,” said Bob Herwick, an analyst with the San Francisco brokerage firm Hambrecht & Quist.

According to McCracken, SGI currently uses only 30,000 MIPS microprocessors per year for its workstations and servers, or about 10 percent of the MIPS chips sold in 1992. Most go into embedded systems like laser printers, and others go to such systems makers as Pyramid Technology Corp. and Sony Corp.

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