October 29, 1997 6:00 PM PST

McCracken: It became personal

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PALO ALTO, California--When soft-spoken Edward McCracken joined Silicon Graphics (SGI) more than 13 years ago, he figured that a decade as chief executive would be a good run.

He passed that mark a while back, but now his tenure as one of CEO quits SGI; 1,000 may lose jobs the longest-running chief executives in Silicon Valley is about to end. McCracken announced today that he will resign as chief executive but will continue in the CEO role until his successor is named. He intends to remain the company's board chairman even after his replacement is selected.

"Sometimes it's hard to find the dividing line between Silicon Graphics and Ed," he told a small press conference after today's annual shareholder meeting here. McCracken said he identifies so closely with SGI that recent weeks have been difficult for him personally because of the criticism the company has received.

"I take full responsibility for all that goes on at Silicon Graphics, including times when it's hard," he noted, speaking quietly after delivering a frank assessment of the company's current situation at today's meeting.

McCracken added that SGI also probably looked much weaker than actually was the case. "The company is much stronger than it looks now."

He joined SGI in 1984 from Hewlett-Packard, where he had helped launch HP's first commercial line, the HP 3000.

Along with SGI cofounder James Clark, who left the company in the mid-1990s to launch Netscape Communications, McCracken took the company to great heights. Its graphics workstations created amazing special effects for Hollywood films, but also were staples for oil, gas, and auto design companies.

In 1992, McCracken led a group of mostly Republican Silicon Valley chief executives in backing Bill Clinton's presidential campaign, shunning then-President George Bush. The group felt that Clinton, unlike Bush, understood technology's role in business.

Clinton eventually appointed McCracken as cochair of a high-profile presidential commission on the future of technology in the U.S. economy. But the executive sat out last year's presidential campaign, saying he had to manage Silicon Graphics, where cracks were already appearing in the company's glossy facade.

Attempting to fill the growing cracks, McCracken told CNET's NEWS.COM in an interview last May that he was ready to realign the company's priorities. He acknowledged that Windows NT was becoming an increasingly popular platform, one which already was challenging SGI's Unix and allowing other companies to enter its traditional markets.

That priority change also involved a major effort to reorganize SGI's business and executive team, which resulted in the resignation of its chief financial officer, Stanley Meresman.

Under McCracken's leadership, the company broadened its offerings over time through mergers with MIPS Technologies, Alias Research, Wavefront Technologies, and Cray Research. But analysts said McCracken simply did not have the experience to transform the company into a business with a variety of offerings--the kind of company that can thrive in a competitive marketplace.

Rather, SGI was facing tough competition and an image problem pegging it as a niche company that only manufactured high-end 3D graphics workstations.

Brian Eisenbarth, an analyst with San Francisco-based Collins & Company, questioned how long it would take SGI to become profitable as a standalone company. He said that it makes the most sense for the company to merge with the likes of IBM or Hewlett-Packard, one of its competitors in the server area.

Eisenbarth added that any replacement for McCracken is going to face some tough issues, namely heavy competition and pricing pressure, in addition to the need to curb costs and improve the company's image so that all of its product offerings, not just workstations, will be recognized in the marketplace.

During the press conference, McCracken mentioned he does not consider his company an acquisition candidate, adding that SGI has had no contacts from potential suitors. "The company is not for sale, but our board has had a chance to review our strategy. It is an internal growth-based strategy."

He declined to speculate about his own future after SGI. "I'll take some time to reflect on that. "I haven't [yet] had that luxury." McCracken pointed out that managing the company's recovery remains his primary focus, noting that his recent sabbatical from SGI was the first time he has taken more than two weeks off work since junior high school.

 Silicon Graphics history at a glance
1984   Photo: Edward McCraken

Edward McCracken joins as president and CEO. The company's first workstations ship.


1986   SGI holds initial public offering.

1987   Its first RISC workstations ship.

1992   Company merges with MIPS Computer Systems, creates new subsidiary named MIPS Technologies.

1993   Forges relationship with Time Warner to develop Full Service Network technology. Lands agreement with Nintendo to create Nintendo Ultra 64.

1994   McCracken given additional title of chairman. Forms Silicon Studio, a wholly owned subsidiary focused on interactive digital media markets.

1995   Merges with Alias Research and Wavefront Technologies to make new independent software subsidiary named Alias/Wavefront.

Launches WebForce, a line of integrated hardware and software for professional Web authoring and high-performance serving, and Cosmo, a software suite that brings interactive multimedia and 3D graphics to the Web.

1996   Merges with Cray Research, now a subsidiary focused on supercomputing technologies.

Launches the 02 desktop workstation line, the Onyx2 visualization supercomputing family, and the Origin high-performance server family.

1997   Rolls out the Octane power desktop workstation line, including the Octane/SI, Octane/SSI, and Octane/MXI models.

Acquires PC 3D Internet software company ParaGraph International. Creates Cosmo Software, a new multiplatform Internet software business unit; announces first billion-dollar fiscal quarter for the three months ended June 30.

McCracken is resigning as CEO but will remain as chairman.

 

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