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Friends and Foes; Now NEC and SGI Team on Supercomputers >BY Phil Jones and William Fellows.

In the dust and debris of SGI's collapsed Windows NT strategy, a picture is emerging of a potentially much closer relationship with its former Japanese rival NEC Corp in the politically sensitive supercomputer space. Wednesday's announcement that SGI had thrown in the NT towel included news of wide-scale restructuring, and a plan to give its Cray Research supercomputer interests independent subsidiary status as a prelude to a sale. SGI also said it had agreed a deal with NEC under which the Japanese company will now resell high-end SGI machines in Japan.

Full details are expected by August 19, but NEC yesterday issued an independent statement which said that a memorandum of understanding has already been signed, which provides for NEC to supply SGI Japan with the SX-5 Series of supercomputers, while NEC will receive SGI's ccNUMA Origin 2000 servers which run Irix Unix and accommodate up to 256 CPUs. "NEC and SGI Japan will accelerate their system integration business through this partnership," the Japanese company said, adding that full finalization of the agreement can now be expected by the end of September.

As it stands the memorandum describes nothing very new. Earlier in the current fiscal year, NEC bid an SX-5 and SGI Origin 2000 solution to the Japan Marine Science and Technology Center, and SGI in its turn offered a similar combined package to Tokyo Inst itute of Technology Computer Center. NEC said the partnership reflects the need to meet growing market demand for high end systems which offer the characteristics of both scalar parallel machines, such as Origin, and the vector processing strengths of the SX-5.

NEC's statement went on to say that "through the relationship in the area of semiconductors and workstations, NEC and SGI Japan have agreed on sales cooperation for this new alliance." Given previous US sensitivity over the question of Japanese dumping of supercomputer technology, at the expense of former sacred and strategic technology high-tech cows like Cray, the NEC and SGI alliance to sell complementary technologies into Japanese installations looks like a good way of opening the door to US imports, without unduly threatening the local interest. Ironically, it was SGI's Cray unit which got the US Department of Commerce to impose anti-dumping duties on NEC for selling its SX supercomputer generation into the US for less than their real value. However, quite how US trade officials will view a full blooded NEC takeover of, albeit failing, high-tech ventures like Cray, remains to be seen, and possibly quite soon.

Other fallout from SGI's latest attempt to reinvent itself led Merrill Lynch & Co to speculate that it will sell off its $100m Alias/Wavefront software business, perhaps next year. SGI's holding in the joint venture into which its Visual Workstation NT line is to be poured will fall below 50%, and be off the books, the brokerage says. Although CEO Rick Belluzzo told Merrill that it could grow to do $1bn in sales "the stock market likely would not highly value it. The NT foray has not worked, so better to limit losses (and it's losing over $20m a quarter)," says Merrill. The brokerage estimates that SGI's fiscal year 2000 revenue should rise by 3% to $2.8bn even though the core business will rise by about 15%. "SGI will divest Cray ($250m of revenue) at some point, own less than 50% of MIPS ($90m revenue), and probably get rid of Alias/Wavefront ($100m). Consequently, we don't expect solid reported revenue growth until at least the second half of financial year 2001," it said.
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Publication:Computergram International
Geographic Code:1USA
Date:Aug 12, 1999
Words:590
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