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InsideTrack: rumors of other bidders for SGI [Updated]

I’ll show you mine if you show me yours…here’s what I’m hearing about companies sniffing around SGI and looking at the potential of bidding against Rackable.

Cisco: given their Unified Computing Platform (codenamed California, covered here), this move could make sense as a lever into HPC, but its not clear that Cisco wants to get into HPC. UCS is more strongly aligned with the enterprise (Cisco/Sun might have worked). Of the two pure play HPC companies SGI has the strongest commercial high end computing customer base, and this could help Cisco cross-market its UCS and other solutions. Cisco has a market cap over $100B, and at the end of last fiscal year had just over $5B in cash and equivalents, and they are profitable. If they want in they could easily outbid Rackable.

HP: Although HP and IBM dominate the Top500, HP hasn’t had a strong presence in the top 10 for a while. SGI’s R&D in HPC could reinvigorate their offering. HP has a market cap of just about $85B right now, with $10B of cash and equivalents on hand. [Update: Readers have also pointed out that HP is the only other large-scale Itanium vendor in the US.  Buying SGI would be a consolidation of technology and talent surrounding the
platform.]

NEC: NEC has a strong presence overseas, but they are weak in the US. An SGI buy could give them leverage into the Americas, but would cause problems with SGI’s extensive federal business (which I assume would remain separate as they did when Bob Bishop — a native Australian — was head of the company). The company had cash on hand of about $2.5B US a year ago (the most recent info I could find). I think this one is unlikely, but I’ve heard it a couple times now.

Bull: Bull is a significant HPC vendor in Europe, but does very little elsewhere. In fact, France (52%) and the rest of Western Europe (27%) account for 79% of the company’s business, so you can see that this is a company in strong need of diversifying its customer base. Also, SGI’s R&D at the high end would be a nice complement to their cluster-based business. As of their last annual report they show only about $400M cash on hand, but they could clearly make a decision to invest in future growth and make a competitive bid for the company. I also think this one is unlikely, but I like it better than NEC.

I guess that HP is probably the most practical bidder, but it’s also the most boring. Bull is interesting and European ownership could work; Cisco seems possible but it would require knowledge about their plans in HPC that we don’t currently have. NEC seems unlikely given cultural differences, although the company’s research heritage could serve SGI’s future roadmap well.

Guess we’ll know on the 30th.

Comments

  1. Jeff Layton says:

    What happened to the Rackable deal? I thought they were on tap to buy SGI?

    Well, of the list of companies I think Cisco might well go all in on this one. With their new California product they might be looking for some serious SMP technology – would give them a leg up in that respect.

    Jeff

  2. John West says:

    Jeff – Rackable is still in the chute as the first bidder, and with the rumored interest one might also speculate that they would increase their bid to stave off competitors. This post is just about who _else_ might be in the hunt.

  3. There was an article on Bloomberg (http://www.bloomberg.com/apps/news?pid=20601109&sid=amGdxEWXfiBQ&refer=home) saying that Cisco has a pile of cash that they want to spend on acquisitions. Timing could be right here and I am not surprised to hear they are in the loop.
    We need another ‘Tier-1′ entrant to the HPC space – its poorly served as it is. A HP takeover would shrink the choice even more. A takeover Cisco get therefore gets my backing.

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