Silicon Graphics May Announce Intel Pact

Silicon Graphics Inc. will unveil a new strategy today aimed at rebuilding a market lost to competitors making cheaper computers.

The presentation, to a group of analysts in New York, will be the first major announcement from Richard Belluzzo since he was named chief executive of the struggling computer maker in February. His new strategy is expected to include a licensing deal with Intel Corp. and a possible spin off of part of its MIPS microprocessor business.

The Wall Street Journal reported Monday that Intel and Silicon Graphics will enter a broad licensing agreement allowing Silicon Graphics to develop custom chips inside its Intel-based computers that will run faster than competitor products and carry superior graphics capabilities.

Although neither company would confirm those plans, Intel did note that Silicon Graphics has already agreed to use Intel chips in some of its low-end computers.

Silicon Graphics makes computers with advanced graphics capabilities, which were once widely popular among designers, engineers and movie special effects artists. But with lower-priced PCs increasingly equipped with advanced graphics capabilities, its business has eroded.

The company has had several quarters of disappointing results and recently announced that its third-quarter earnings would fall short of expectations.

Analysts said some sort of a spin off of MIPS might enable Silicon Graphics to focus more on its core businesses.

The company bought MIPS six years ago to design chips for its computers, but the unit has become less central to Silicon Graphics operations as it bases future machines on the more widely-accepted Intel chips.