Silicon Graphics Will Eliminate 700 to 1,000 Jobs

Silicon Graphics Inc., whose computers have been used to make special effects for some of Hollywood’s biggest blockbusters, said Wednesday that it plans to lay off as many as 1,000 workers and that its longtime chief executive, Edward McCracken, will resign.

The desperate moves, which could affect nearly 10% of the company’s work force, follow a $57-million loss in its latest quarter and a string of product delays and other troubles that have crippled the maker of powerful computer workstations.

Analysts said the Mountain View, Calif.-based company has been woefully slow to react to an invasion of the low-end workstation market by cheaper and increasingly powerful personal computers that use Intel Corp. chips and Microsoft Corp. software.

“They believed too much in their own technology and were too internally focused,” said Peter ffoulkes, an analyst at research firm Dataquest in San Jose. “The market changed underneath them, and now they’re a year or two behind.”

The company said it will eliminate 700 to 1,000 positions worldwide, including contractors, and that it expects to take a restructuring charge of $50 million. Silicon Graphics employs 11,000 people.

Silicon Graphics shares eased 38 cents to close at $15.75 on the New York Stock Exchange. The company’s stock traded as high as $39 a share two years ago.

McCracken, CEO since 1984, said he will resign as soon as a successor is named. During his tenure, Silicon Graphics’ sales grew from $5.4 million in 1984 to $3.7 billion last year.

But McCracken has taken much of the blame for the company’s recent problems, including botched product transitions last year and a disruptive overhaul of the sales force. He was also criticized for allowing the company’s position to deteriorate while he served as a technology advisor to the Clinton administration.

Rumors about McCracken’s departure and layoffs were heightened recently when the company canceled a conference call with analysts and said it would announce changes after a meeting of its board. The announcement was finally made Wednesday, the day of the company’s annual shareholder meeting in Palo Alto.

“I’ve decided that now is the right time for the company and me personally to make a change,” McCracken said.

The company also announced the resignation of Gary Lauer, executive vice president of field operations. Robert H. Ewald, executive vice president of computer systems, will serve as the company’s chief operating officer, overseeing product development, manufacturing and sales.

Ewald, who was chief executive of Cray Research Inc. when it was purchased by Silicon Graphics for $767 million last year, is also regarded as a potential successor to McCracken.

Silicon Graphics’ luster was at its brightest a few years ago, when its workstations--which can cost tens of thousands of dollars--were among the hottest products on the market. They were used by engineers and graphic artists to create the digital dinosaurs that roamed the “Jurassic Park” movie.

But Sun Microsystems Inc. and other rivals have made stronger pushes into the top end of the workstation market, and have kept Silicon Graphics from making an effective push into the market for the corporate servers used by businesses to manage databases. Meanwhile, the low end of the market was shifting toward high-performance PCs.

Silicon Graphics recently announced it would make workstations using Intel chips and Microsoft’s Windows NT operating system. The move was seen as a necessary but belated departure from a long tradition of building machines using its own microprocessors and Unix.