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SGI caves in to Intel
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April 14, 1998: 12:42 p.m. ET
Silicon Graphics will use Pentium II in new workstations, spin off chip division
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NEW YORK (CNNfn) - Silicon Graphics, Inc. on Tuesday said it would forego using its own chips in future workstations, instead incorporating those from Intel Corp. as part of a new strategy to revitalize its struggling business.
The company also said it expects to cut about $200 million in its fiscal 1999 operating expenses and eliminate about 1,000 jobs, or 10 percent of its work force, through attrition, divestitures and other efforts.
Silicon Graphics (SGI), known for its high-end graphics workstations designed for engineers, scientists and artists, said it will incorporate Intel's next-generation Pentium II chips into its workstations. The first of these systems, which will also run Microsoft Corp.'s Windows NT operating system, are due for release in the second half of 1998.
As part of the deal with Intel, SGI will incorporate its own IRIX operating system into Intel's "Merced" chip, which is due in late 1999.
SGI said it will spin off MIPS Technologies, Inc., the subsidiary that makes the chips used in its current workstations. The new strategy comes as SGI's workstations have begun losing market share to those using Intel chips and Windows NT software.
In March, SGI said it expected to report worse-than-expected third-quarter losses. SGI hopes its alliances with Intel and Microsoft, as well as its cost-cutting measures, will revive the struggling company.
The company expects to announce its third-quarter results on April 21.
Shares of Silicon Graphics (SGI) fell 1/16 to 16 in early trading. Intel (INTC) shares slipped 1 to 75-1/4. 
-- from staff and wire reports
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