SGI promotes CFO, boosts Linux effort

SGI, struggling to regain its share of the graphics workstation business, has promoted Chief Financial Officer Hal Covert to president, freeing Chief Executive Bob Bishop to spend more time with customers.

In addition, the Mountain View, Calif., company released version 1.0 of a high-end file system for Linux, the clone of Unix that SGI has banked on heavily for its future workstation and server products. SGI promised that the software would be released for Linux nearly two years ago.

"I can focus on the internal operations," concentrating on making the company more efficient and profitable, Covert said in an interview Tuesday. That means Bishop "will be able to focus full-time attention on customers and the overall strategic direction of the company."

Covert will retain his CFO title but shift some of his duties to others.

Years ago, SGI hoped to use Intel servers with the Windows operating system to help the company become as powerful as Sun Microsystems, but the plan proved overambitious, and SGI reverted to its older plan of selling high-end Unix supercomputers and systems for tasks such as scrutinizing automobile designs. The worsening economic climate has made the transition harder, and SGI announced in April it would lay off 1,000 employees to adjust for lower revenue.

The company hopes to achieve profitability in the quarter beginning in July. "We're a little behind where we want to be," Covert said.

Others were more skeptical. "We believe SGI is three to four quarters away from operating profitability," Salomon Smith Barney analyst John Jones wrote in a recent research note. "SGI's announced 1,000-employee staff reduction is a good start, although this special charge will likely cost" $65 million to $75 million in cash in the third and fourth quarters of calendar 2001.

The current economic climate has been hammering SGI as well as competitors such as Compaq Computer, Hewlett-Packard and Sun, but Covert said the company expects the situation to improve in the second half of 2001.

Covert joined SGI after leaving Linux software company Red Hat in July 2000.

SGI is banking on Linux for computers using Intel's upcoming Itanium chip, expected to be announced late this May, according to a source familiar with the plan. Part of the company's longer-term effort to accommodate the chip consequently relies on improving Linux in directions where SGI thinks it can do better than the competition.

To that end, SGI released version 1.0 of XFS, file system software that governs how a computer reads and writes information on hard disks. XFS is a "journaling" file system, which keeps track of changes to files so that it's easier and faster to recover from computer crashes.

Most high-end operating systems, such as Windows 2000 and various versions of Unix, have journaling file systems. With the release of XFS, Linux now has four, along with JFS from IBM, ReiserFS and ext3. Because Linux computers can use numerous file systems simultaneously and the various journaling file systems each have their advantages, top Linux programmers intend to let all the file systems compete side by side.