Silicon Graphics Incorporated

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Silicon Graphics Incorporated

2011 North Shoreline Boulevard
Mountain View, California 94039
U.S.A.
(415) 960-1980
Fax: (415) 961-0595

Public Company
Incorporated: 1982
Employees: 2,568
Sales: $866.6 million
Stock Exchanges: New York
SICs: 3577 Computer Peripheral Equipment Nee; 7372 Prepackaged Software

Silicon Graphics Incorporated is one of the leading manufacturers of graphics computer systems. Its history may be described as an exemplary, perhaps even archetypal, Silicon Valley success story. Founded by a high school dropout turned college professor, Silicon Graphics capitalized on pioneering technology in 3-D computer graphics to create products used in a wide variety of professions, including engineering, chemistry, and film production. The company combined technological prowess with shrewd management to produce explosive growth; within a decade of its founding, it had entered the Fortune 500.

The story of Silicon Graphics began in 1979, when James Clark, an electrical engineering professor at Stanford University, assembled a team of six graduate students to study the possibilities of computer graphics. Within two years, Clark’s team developed a powerful semiconductor chip, which they called the Geometry Engine, that would allow small computers to produce sophisticated three-dimensional graphics simulations previously the domain of large mainframes. Clark patented the Geometry Engine, and in 1982 he and his team left Stanford to found Silicon Graphics.

In 1983 the company released its first products: the IRIS 1000 graphics terminal and an accompanying software interface known as the IRIS Graphics Library. The next year Silicon Graphics released its first workstation, the IRIS 1400, and followed it in 1985 with the IRIS 2400, a workstation with a window manager. These early entries in the IRIS series targeted the middle range of the graphics workstations market—those selling for $45,000 to $100,000—and accounted for over 50 percent of all 3-D graphics workstations sold by 1988. Sales increased steeply and consistently, reaching $153 million in 1988. Within its first six years, Silicon Graphics had established a secure and lucrative niche for itself in the computer industry.

Silicon Graphics succeeded so brilliantly in its early years in large part because it had introduced a useful product that had drawn relatively little attention from any of its potential rivals. 3-D graphics simulations were extremely useful to mechanical engineers who wanted to assess their designs without having to build prototypes, as well as chemists who used 3-D modelling to study molecules. Workstations like the IRIS series provided power at a relatively affordable price, and major workstation manufacturers like Hewlett-Packard, Apollo Computer, and Sun Microsystems were slow to focus their energies on 3-D graphics, leaving Silicon Graphics without much direct competition.

Observers also credited James Clark’s technical skill and entrepreneurial sense for the company’s success. The path to Silicon Valley glory was a circuitous one for Clark, who dropped out of high school in Plainview, Texas, after he was suspended for setting off a smoke bomb on a school bus. After a hitch in the Navy, he went back to school, enrolling as an undergraduate at Tulane University. He went on to earn an M. S. in physics from University of New Orleans and a Ph.D. in computer science from University of Utah, where he first became interested in computer graphics. Clark then committed himself to an academic career, holding teaching posts at University of California at Santa Cruz, the New York Institute of Technology, and University of California at Berkeley before coming to Stanford. But along the way, he became disenchanted with the ways of academia. “I had always seen myself as a senior professor at a university,” he once told The Business Journal-San Jose, “but I think I learned that my strength is making things that work, rather than writing papers. Universities encourage writing a lot of papers.” Hence his departure from Stanford and the founding of Silicon Graphics in 1982.

Once he founded the company, Clark displayed the good sense to find his proper role within the operating structure and stick to it. While high-tech companies like Silicon Graphics are often founded by technologists who turn day-to-day operations over to businesspeople, in many cases the companies falter because the technologists remain too closely involved in business affairs, making poor decisions or allowing the technological edge to dull. Soon after Silicon Graphics was born, Clark brought in Edward McCracken, a veteran Hewlett-Packard executive, to run the company as president and CEO while he remained chairperson. Clark concentrated on serving as the company’s technology guru, leaving McCracken to take care of the business operations. According to McCracken, this role best suited Clark’s temperament: “Jim’s not a day-to-day person. He works in his own time frame,” he told The Business Journal — San Jose. McCracken continued, “He takes complex things and makes it simple. It might take a month, a day, or a year. He gets in these moods for a while where he’s almost unavailable. He’s most effective when he’s in that mood.” Clark also used this division of labor to devote more time to outside interests that included ballet, classical music, art, and flying a stunt plane.

A useful blend of high technology and business sense enabled Silicon Graphics to move forward from its early successes. In 1987 it became the first computer company to make use of MIPS Computer Systems’ innovative reduced instruction-set chip, or RISC, when it incorporated RISC architecture into its new IRIS 4D/60 workstation. Within several years, most workstations would use RISCs. The company received a boost the next year when IBM agreed to buy Silicon Graphics’ IRIS graphics card for use in its own RS/6000 graphics workstations and to take out a license for the IRIS Graphics Library—a big first step toward making the IRIS Graphics Library the industry standard.

Also in 1988, Silicon Graphics introduced amid much fanfare a new line of entry level graphics workstations, which it called Eclipse. Although it dominated the more expensive end of the graphics workstation market, the company needed to broaden its customer base if it expected to maintain sales growth. The Eclipse was designed to bring 3-D graphics to people who had previously regarded IRIS workstations as unaffordable. Eclipse lacked the speed and processing power of more expensive machines, but initial versions sold for less than $20,000—as little as one-fifth of the cost of higher-end machines. Eclipse scored a major success soon after its release when Chrysler announced that it would buy a large number of the machines to go with the IRIS workstations that it was already using to help design its automobiles.

Although Eclipse put Silicon Graphics into more direct competition with its rival workstation manufacturers, who began to chip in with their own low-end 3-D workstations, it also succeeded in expanding the company’s customer base. In 1990 sales volume topped $420 million. The move into the lower priced, high-volume end of the market worked well enough for Silicon Graphics that in 1991 the company released an even less expensive product line—the IRIS Indigo, a 3-D graphics workstation so compact that the company called it the first personal computer to use RISC architecture. The Indigo offered many features found on more expensive models, as well as digital audio and video processing capability, and the base model sold for less than $10,000.

During this time, Silicon Graphics scored several major coups on the business side. In 1991 the company granted a license to software giant Microsoft for the IRIS Graphics Library. Microsoft intended to use the IRIS Graphics Library in its New Technology operating system for personal computers. Also in 1991, Compaq Computer agreed to acquire a 13 percent stake in Silicon Graphics for $135 million, giving Silicon Graphics a much-desired infusion of capital. Furthermore, Compaq agreed to invest $50 million in a joint workstation development project with Silicon Graphics. Together, these moves provided software developers with greater incentive to write programs for Silicon Graphics machines and also broadened the company’s customer base even further.

In 1992 Silicon Graphics agreed to acquire MIPS Computer Systems, which had run into financial difficulties, in a stock swap valued at $230.8 million. The cost of assimilating MIPS forced Silicon Graphics to post a loss of $118.4 million that year, but it also secured the company’s long-term supply of MIPS’s RISCs, which had become a crucial piece of technology.

In January 1993 Silicon Graphics announced a new computer that would use RISC architecture to achieve supercomputer power at relatively affordable prices. The Power Challenge, as it was called, would link multiple RISCs in a single machine to provide unprecedented processing capability in a computer of that price. Whereas traditional supercomputers like those made by IBM and Cray Research typically sold for millions of dollars, the Power Challenge would sell for between $120,000 and $900,000. The new product was announced over a year in advance of its anticipated shipping date to give targeted customers, such as government agencies and universities previously unable to afford supercomputers, time to include it in their budgets. Observers pegged Power Challenge as a sudden move into the faltering field of supercomputer manufacturing, but in fact the company’s ever more powerful workstations were approaching the level of supercomputers anyway, and the company had already established contacts with customers at whom the Power Challenge would be aimed.

In April 1993 Silicon Graphics and Industrial Light and Magic, the famed special effects division of Lucasfilm, announced that they had joined forces to create a high-tech entertainment special effects laboratory. The joint venture was called Joint Environment for Digital Imaging—the acronym JEDI recalled the Jedi Knights of Lucasfilm chair George Lucas’s Star Wars trilogy—and grew out of the fact that Industrial Light and Magic had been using Silicon Graphics workstations since 1987. The liquid metal cyborg featured in the film Terminator 2, the dinosaurs in Jurassic Park, special effects in The Hunt for Red October and The Abyss, and animation in Beauty and the Beast were all created on Silicon Graphics computers. For Lucas and Industrial Light and Magic, JEDI was expected to yield both financial and aesthetic benefits: digital manipulation of images cost about one-tenth as much as models and drawings, and, according to Lucas, would “change motion pictures from a photographic process to more of a painterly process,” enabling greater authorial control over a film’s appearance. For its part, Silicon Graphics hoped that alliance with an entertainment industry partner would help push the leading edge of its technological development forward.

The entertainment industry was also a growing interest of James Clark’s at the time. On the heels of the announcement of the JEDI alliance, reports surfaced that Silicon Graphics had entered into talks with communications giant Time Warner to explore the possibilities of interactive home entertainment and other advanced cable television technologies. The company would not comment on the reports, but Clark and some of his executives had made it known publicly that Silicon Graphics was interested in developing a computer that would provide interactive services, including networked 3-D video games, for users through cable television hookups.

Silicon Graphics’ interest in entertainment-related technologies is perhaps particularly apropos since the company was founded by a man whom The Business Journal-San Jose once described as looking like “Hollywood’s idea of a successful entrepreneur”—tall, blond, and clad in “expensive Italian suits with bright Italian knit-silk ties.” While some have suggested that the move into entertainment technology represents the deliberate attempts of Clark and McCracken to lead Silicon Graphics away from academia, others have maintained that the company has simply refused to remain in the small niche in which it developed. Instead, Silicon Graphics has made a lot of money in its short history by delivering the technology that made it distinctive to as many people as need and enjoy it.

Principal Subsidiaries

Silicon Graphics International Inc. (Barbados); Silicon Graphics Ltd. (U.K.); Nihon Silicon Graphics K.K. (Japan); Silicon Graphics Pte Ltd. (Singapore); Silicon Graphics AB (Sweden); Silicon Graphics S.A. (Switzerland); Silicon Graphics Gmbh (Germany); Silicon Graphics Canada Inc.; Silicon Graphics World Trade Corp.; Silicon Graphics Ltd. (Israel); Silicon Graphics Ltd. (Hong Kong); Silicon Graphics S.A.R.L. (France); Silicon Graphics S.p.A. (Italy); Silicon Graphics B.V.(Netherlands); Silicon Graphics Pty Ltd. (Australia); Silicon Graphics Federal Sales Corp.; Silicon Graphics Computer Systems Ltd. (Israel); Silicon Graphics Manufacturing S.A. (Switzerland); Silicon Graphics Applications Systems Ltd. (U.K.); Silicon Graphics A/S (Norway); Silicon Graphics A/S (Denmark); Silicon Graphics N.V./S.A. (Belgium); Silicon Graphics OY (Finland); Silicon Graphics S.A. (Spain); Silicon Graphics Computer Systems Gmbh (Austria).