<strong>It's not really true that Apple's $4B cash isn't really doing them any good. That money ain't sitting in a savings account, or in a vault at Apple HQ.</strong><hr></blockquote>
Given that Fred Anderson seems like a pretty switched-on guy, I would hope not. Anyway, its $2B in cash and $2B in short-term investments, all I want is $275 to $350M of that.
<strong>Now, this "Apple-buys-SGI" strategy.....Is that before or after Apple buys Pixar, Sony buys Apple, Disney buys Apple or Sun buys Apple?
I get confused sometimes.
TING5</strong><hr></blockquote>
On a serious note, if there is an advantage to a JV with Sony for the i- & e- models at some point in the future, I would sign it subject to terms. Two of the most recognised brands in the world joined in harmony - how many systems could you sell based on Sony's skill at taking a brand and marketing it to death in the domestic space. Also, think of the breadth of the distribution channel. Makes me shiver!
<strong>- Does Apple stand to gain from SGI using PPC?
No they won't gain a dime. Remember, Apple doesnt make PPC, moto and IBM does. The ony way Apple would gain from SGI using PPC processors is if they made them themselves or somehow contributed to increased competition in the AIM space.
</strong><hr></blockquote>
Apple could gain a great deal if development of faster desktop CPU's is increased by Motorolla and IBM, and with every new customer that moves to the Power PC chip for use in a lower end workstation/desktop PC IBM and Motorolla have an increased incentive to do just that...
Apple could gain a great deal if development of faster desktop CPU's is increased by Motorolla and IBM, and with every new customer that moves to the Power PC chip for use in a lower end workstation/desktop PC IBM and Motorolla have an increased incentive to do just that...</strong><hr></blockquote>
And there's an indirect benefit as well!
If you can increase the overall number of PPC -based systems that you ship, as well as the number of processors in each box, you can effectively invoke a minor improvement in the economies of scale which will decrease the cost that Apple has to pay for each CPU.
On top of that, an SGI-enhanced PMac Pro with multiple processors would have a higher street value than the norm, but in effect cost no more in fixed costs such as packaging or shipping - so in reality they should be more profitable in % terms than an eMac.
not saying that this is likely or anything, but it may explain why many apple execs are supposedly dumping all their stock in apple, because they've decided to do this and they know it'll be unpopular with the stockholders.
<strong>It's not really true that Apple's $4B cash isn't really doing them any good. That money ain't sitting in a savings account, or in a vault at Apple HQ.</strong><hr></blockquote>
Actually, in a sense ... it is. What that money does, is essentially prevent Apple from being bought out, and helps them weather out tough times.
<strong>Don't let the Hooligan suck you into his RDF vortex. He's clearly had too much Bass today (the world's finest beverage I might add).
</strong><hr></blockquote>
I hope you're not referring to me as the Hooligan! I am far too much of physical coward.
Also, I wouldn't drink Bass if you paid me; now Sam Smiths (Tadcaster, North Yorks) - there's a beer, smooth is not a word that adequately describes the sensation!
Actually, it's probably a reaction to too much ice cream.
I'm with you all the way on Sam Smiths. I can get excited about the SGI thang, but I'm not convinced Apple will do it ... even as SGI lurches ever-closer to an ignominious end ...
Oh yeah, and whaddya call the guy to left SGI for Apple late on in the dev cycle of Maya. Richard somebody? I'm surprised his name hasn't cropped up yet in this thread ...
Aw well, I want somthing to render radiosity at print res without having to keep going away for the evening. Something is up on the processor front .. guess I'll just wait ...
Apple's been buying software companies, not hardware companies (well, Raycer, but that's a much tinier company than SGI).
If Apple doesn't have a plan for building hardware to compete with Intel in the next year or two, then it's too late. The rewards of buying SGI now wouldn't come to fruition until too late.
More likely, Apple is going to buy IBM. Yeah, they've got the money, they can do it!
Apple's been buying software companies, not hardware companies (well, Raycer, but that's a much tinier company than SGI).
If Apple doesn't have a plan for building hardware to compete with Intel in the next year or two, then it's too late. The rewards of buying SGI now wouldn't come to fruition until too late.
More likely, Apple is going to buy IBM. Yeah, they've got the money, they can do it!</strong><hr></blockquote>
True, but you could prefix your first sentence with "So far, ", because - until the purchase of the Macromedia product that became FCP - I wasn't aware that Apple was in the application software business, or specifically film/video post-production application software business.
Although I have no objection to learning from history, I would argue that using it as an absolute indicator for what will happen in the future is a bit of a dangerous business.
Ultimately, most corporate entities will execute any necessary action to survive & flourish: It's a demonstration of darwinian theory in action with the most successful examples being companies like M$ (from a development language to an OS to applications to games consoles), GE or Amazon. Survival means never standing still and very often taking the road less travelled.
The guy who used to run AMR (American Airlines) was once asked, something like: "If you were forced to choose, would you hold on to your aircraft and solely operate as an airline, or would you hold on to Sabre (the AMR reservation system)?" He chose Sabre, because it was a more powerful revenue earner and the running costs were a fraction of running an airline fleet. My point is that people don't always play the cards you think they will. Apple probably won't buy SGI, but that doesn't preclude an intellectual exercise to explore the possibilities if they did.
If you wanted to buy Sabre, you would have to buy AMR and then asset strip. If you wanted to buy Alias|Wavefront, the quickest way to do it is buy SGI and then asset strip, and whilst you're stripping take anything else that takes your fancy like NUMA or VOD.
The reason the plan works is because investors like a quick buck and can normally be persuaded to do anything for the right price, whereas a company's management may resist the idea of being eroded one product at a time because they understand the overall corporate strategy.
Sometimes, the act can be pre-meditated and sometimes it can be a reaction.
When BMW took control of Rover Cars here in the UK, there was little doubt that the company's CEO (Bernd Pieschstrieder who's now at VAG) was sincere about wanting to turn the brand into a complementary entity to the parent. He is after a all a nephew to Sir Alec Issigonis who designed the first Mini back in the 60s.
However, nearly a billion dollars of losses later, Bernd was gone (along with Wolfgang Rietzle who then went on to run Ford's PAG) and BMW's board threatened to liquidate Rover with extreme prejudice. The fact that Rover was referred to in Munich as The English Patient gives you an idea of the sympathies at the time.
However, BMW were smart (to the point of being devious) - they made sure they transferred all the knowledge of how to build a quality 4x4 from Land Rover, ultimately developing the X5 and soon the X3. Then they sold Land Rover to Ford, ironically landing back in the lap of the recently departed Rietzle, and recovered the vast majority of their losses in the process.
But the asset stripping wasn't finished: Selling Rover Cars to a management buy-out (for the princely sum of £1, I seem to remember), BMW chose to hang on to the Mini brand, which was their "big white hope" for Rover's recovery, and all of the historic brand names that Rover had acquired by being the successor to the old British Leyland (Austin-Healey, Triumph, etc). Rover got to hang on to MG.
Suffice to say, the Mini is selling so well in Europe that they can barely keep up in the factory and the X5 consistently wins best-of-class for road-going all-wheel drives: BMW is no longer considered to be in crisis.
Like I said, entities will do that they need to do to survive: It's carpetbagging in the 21st century. It may not be pretty, but I think that Apple are as capable of doing it as anyone given the right incentive.
Good points! And interesting discussion this time around...
To borrow a quote from the guy who founded the "Home Depot:" If you have a choice between buying an existing ailing competitor, or expanding on your own, expand on your own. Buying the ailing competitor means buying all their problems, including lack of morale and beaten-down employees.
One of the real problems with Apple buying SGI is that the company's already been stripped of most of its valuable assets (as mentioned above). Although some bits and pieces still have a lot of value (like A/W), the value of those bits are less than the cost of acquiring SGI and selling/shutting down the nonvaluable bits. I guess I should say "most likely less" since I haven't looked at any balance sheets... regardless, paying $500M is too much for A/W- I suspect A/W's yearly sales are on the order of $10-50M, so paying 10x yearly earnings is just out of line. Again- I haven't double-checked these figures, I'm just making them up for argument's sake. It would be interesting to get a better estimate from SGI's SEC filings.
As for NUMA (or other HPC) technology, SGI doesn't have a monopoly. There's lots of research going on at many academic and private institutions into "next generation" architectures, and plenty of companies which are working on them. IBM, as mentioned is one, but so are Fujitsu, NEC, AMD, and even Motorola. Plus "plenty more" smaller ones.
Sure, SGI has real-world existing shipping examples of very exotic and high performance machinery, but a lot of that is legacy equipment- it all runs MIPS! (OK, x86 is their lower end range, but we did say "high performance" ) So either this legacy is sold off or shuttered, or else it drags down resources from other, more important to Apple, projects. And shuttering it is expensive, and it can only be sold off if you can find a buyer... and I very much doubt you'll find a buyer at anything near $500M (or else it would already have been sold)... So it's a big expense for relatively little gain.
Other next-gen tech can be had from other suppliers for less. Apple is a member of the HyperTransport consortium, after all, and is presumably gaining plenty of tech from that. Both Moto and IBM are going RIO with future PPC designs... presumably Apple is gaining something from that.
Oh, and one more thing ...
In one of the investor phone call discussions last year, Jobs actually was asked whether Apple was looking at acquiring SGI, and said no...
But it's still very interesting to talk about, no doubt at all about that.
<strong>Good points! And interesting discussion this time around...
To borrow a quote from the guy who founded the "Home Depot:" If you have a choice between buying an existing ailing competitor, or expanding on your own, expand on your own. Buying the ailing competitor means buying all their problems, including lack of morale and beaten-down employees.
One of the real problems with Apple buying SGI is that the company's already been stripped of most of its valuable assets (as mentioned above). Although some bits and pieces still have a lot of value (like A/W), the value of those bits are less than the cost of acquiring SGI and selling/shutting down the nonvaluable bits. I guess I should say "most likely less" since I haven't looked at any balance sheets... regardless, paying $500M is too much for A/W- I suspect A/W's yearly sales are on the order of $10-50M, so paying 10x yearly earnings is just out of line. Again- I haven't double-checked these figures, I'm just making them up for argument's sake. It would be interesting to get a better estimate from SGI's SEC filings.
As for NUMA (or other HPC) technology, SGI doesn't have a monopoly. There's lots of research going on at many academic and private institutions into "next generation" architectures, and plenty of companies which are working on them. IBM, as mentioned is one, but so are Fujitsu, NEC, AMD, and even Motorola. Plus "plenty more" smaller ones.
Sure, SGI has real-world existing shipping examples of very exotic and high performance machinery, but a lot of that is legacy equipment- it all runs MIPS! (OK, x86 is their lower end range, but we did say "high performance" ) So either this legacy is sold off or shuttered, or else it drags down resources from other, more important to Apple, projects. And shuttering it is expensive, and it can only be sold off if you can find a buyer... and I very much doubt you'll find a buyer at anything near $500M (or else it would already have been sold)... So it's a big expense for relatively little gain.
Other next-gen tech can be had from other suppliers for less. Apple is a member of the HyperTransport consortium, after all, and is presumably gaining plenty of tech from that. Both Moto and IBM are going RIO with future PPC designs... presumably Apple is gaining something from that.
Oh, and one more thing ...
In one of the investor phone call discussions last year, Jobs actually was asked whether Apple was looking at acquiring SGI, and said no...
But it's still very interesting to talk about, no doubt at all about that.
My 2¢,
-HOS</strong><hr></blockquote>
I find your arguments far more cogent than a blank "Apple are not going to buy a HW company"!
As I have previously implied, even when I started the thread, "What if SGI are already committed to G5 and have already done much of the design and a significant element of the engineering to make that switch?"
Lets takes $25M as the earnings for A/W and multiply by 4. That's $100M of your $500M.
If, and I stress IF, SGI have already gone the G5 route, the cost of developing a similar - mature - range of "big iron" from Apple's point of view is difficult to be precise about, but let's take a stab: let's say you need 60 H/W engineers + (35 working on the actual systems, 15 working on the NUMA stuff, 10 working on miscellaneous stuff) plus 20 working on the software side to make OS XI NUMA capable all at reasonable Cupertino salaries of $80K/year potentially. So that's 80 people at 80K + project/design management (let's say 10 people at $100K), so that's $7.4M/per annum just on people.
Arguably, when all other factors (marketing, hardware, office space, admin, research, etc) are taken into account, the cost of the effort rises to $20M to $30M per annum: If it took 3 years to get to the same stage as SGI on "big iron", that would be a $100M effort.
So now, you've accounted for $200M of your $500M.
So what about the other $300M: As I have previously said, SGIs balance sheet lists around $167M in cash and equivalents, and (bizarrely) Property Plant and Equipment of $178M. Assuming you could dispose of 75% of the latter for book value: thats 167M + 133M or $300M. There's $107M of inventory (let's say you can sell 50% of that for 50% of value, which is conservative), that's $27M (although I think you could get $60M)
Simply settling the Accounts Payable and Acccounts Receivable ledger gets you another $25M, so now you're $50M in the black, short-term & long-term investments get another $90M and intangible assets (?) + Other Current Assets gets you $145M , which gets you to $285M in the black.
I would let the $300M of long-term debt hang around a little, which means I need to clear $500M of other liabilities. That puts the maths back to $215M in the red. And I'm not going to get into write-offs and tax clawbacks, despite the fact that they help my cause.
$215M to get rid of a competitor who is on "my turf" with near identical technology (assuming the G5 rumour is true), and whose presence can only be a contributing factor in getting me involved in an ongoing price & publicity war. Also they have sales of over $1B, which if I directly inherited would generate around $150M in profit in the first year. And I've denied access to A|W to my competitors who would rip me to shreads if they ever had the slightest opportunity.
Oh and you also have a more complete product offering than Sun Microsystems (he says rubbing his hands, and looking at his next victim in a sinister way) loss-making & asset-rich, my favourite! If you followed me into the dark side, by the time we'd finished the only people left standing would be Apple, IBM, HP & Dell. And the only people making proper computers would be Apple IBM and HP. And the only company not mainly reliant on a crap OS would be Apple.
[quote]Originally posted by Mark- Card Carrying FanaticRealist:
<strong>
Sorry, England's performance in the World Cup is causing me to indulge in flights of fancy - you should have heard the stuff I was thinking of on Friday. </strong><hr></blockquote>
This whole SGI affair is a very tantalizing possibility, IMHO. I've been actually talking about this topic with some firends of mine for more than a year--and it looks like I wasn't the only fool exploring the possibilities!
I must admit that I konw little about SGI's HW and SW solutions, aside from the fact--as has been cleverly pointed out--that Apple could cherry pick some really nasty and advanced technologies and assets, but that's not what I wanted to focus on...
A friend of mine is a Mac System Administrator in the biggest technical university in my country; of course, most of the computer labs run on PC HW and SW, but his Mac evangelism is starting to show some promising results--especially after Apple introduced the Xserve. Well, Maya is the key application for the whole university and for this reason most of the time they buy new computers with Maya and little else in mind. Mac or PC is not really an issue--all they need is the best platform for Maya. If Apple were really to buy SGI and A|W they could also optimize and polish it like only Apple can--and this would immediately translate in bigger sales in this market segment. Assuming that what I described for this university is true more or less for many other tech universities in the EU, I think Apple could see much improved sales and profits both from Maya and from its ideal platform--ie the Pro Mac line...
And more Macs in schools mean more Macs in the student's homes. I know that in the US Apple's already a leader in this segment, but in Europe it really needs to wake up and start fighting the PC-oriented mentality (I'm still talking about large state-owned educational institutions) by introducing more compelling HW and SW solutions.
Being able to say "we're the best platform for Maya, and the next version won't even come out for Windows" would really be a good start...
<strong>Which G5? Which G6?</strong><hr></blockquote>
i don't think this forum is about the imminent (or not) release of the g5. obviously apple isn't going to stay on the g4 forever. i think the g5 referred to is just a placeholder for "the next chip used in Apple Macintosh computers". the g5 may not yet exist, but it doesn't mean that sgi isn't still considering moving to ppc.
And, "Apple will get advanced hardware from IBM/Moto/nVidia/ATI ... " - Programmer, please don't make me cry.</strong><hr></blockquote>
Despite the slagging they tend to receive around here, those companies are producing advanced technologies. An Apple-ized version of the POWER4 technology with a RapidIO or HyperTransport link to an InfinitiBand interconnect fabric, and you've got a heck of a clustered NUMA machine. Or if the IBM thing isn't true then the next chip from Motorola with its RapidIO interface. The next generation graphics cards from nVidia & ATI will be on the Mac and they are extremely powerful, and Apple is on the ARB helping move OpenGL forward to take advantage of these new GPUs.
Its going to be an interesting ride, and I don't think that Apple needs to spend huge amounts of money on acquisitions or risky projects to leverage what is going on throughout the industry. Apple is really about integration, not designing the new low-level technologies... leave that to the companies that make their living there because it is a nasty place to dive into. By taking advantage of industry standards Apple reduces the pain caused by being the odd-ball on the fringe of the computing industry. They can build machines that fit right in and shine because they are spending their money making sure that they've got the spit-and-polish that others can't afford to add.
However, I still think that you're underestimating legacy costs, maintenance costs, and future development costs.
To borrow the usual car industry analogy- Ford bought Jaguar a while ago, and then proceeded to pump billions of dollars into it to build new Jaguar product. It will take decades for Ford to recoup both the initial investment and the development costs of the purchase. It's very easy to argue that this ROI will occur way too slowly, and that the money would have been better spent elsewhere, say on Ford's own product line.
The same argument has been applied to GM's creation of Saturn (the billions spent could have revamped, say, Chevy, and been better spent with a faster ROI). And also the same argument has been used for GM's "roboticization" during the 80s- where they spent in the tens of billions, and could have just outright purchased Toyota for the same price, no doubt a better investment.
For Apple to buy out SGI puts them in the same position- even assuming SGI has begun a migration to PPC (which we don't even know), the costs of migrating SGI's existing user base to PPC haven't even been estimated yet, and the costs of just dumping SGI's user base is larger than the cost of buying SGI and shutting it down completely- since you've now pissed off that user base who now won't become future Apple customers...
Worse, assuming Apple wants to "bring SGI's customers back into the fold" (sorry- borrowing from the letter I got from Jobs when Apple bought out PowerComputing: my PowerCenter r0ck3d!), Apple will need to continue a massive investment into future SGI hardware... since the Origin will need a PPC based replacement which can offer at the least, similar performance (at similar price!). I can understand the desire to have our hypothetical PPC Origin technology "trickle down" to Apple's consumer line, but it's still a very expensive way of getting next-generation technology. Not when companies like nVidia, ATi, Motorola and IBM are happy developing it on their own...
I do like your estimated figures though, I just disagree with them representing all the possible costs.
Comments
<strong>It's not really true that Apple's $4B cash isn't really doing them any good. That money ain't sitting in a savings account, or in a vault at Apple HQ.</strong><hr></blockquote>
Given that Fred Anderson seems like a pretty switched-on guy, I would hope not. Anyway, its $2B in cash and $2B in short-term investments, all I want is $275 to $350M of that.
I get confused sometimes.
TING5
<strong>Now, this "Apple-buys-SGI" strategy.....Is that before or after Apple buys Pixar, Sony buys Apple, Disney buys Apple or Sun buys Apple?
I get confused sometimes.
TING5</strong><hr></blockquote>
On a serious note, if there is an advantage to a JV with Sony for the i- & e- models at some point in the future, I would sign it subject to terms. Two of the most recognised brands in the world joined in harmony - how many systems could you sell based on Sony's skill at taking a brand and marketing it to death in the domestic space. Also, think of the breadth of the distribution channel. Makes me shiver!
<strong>- Does Apple stand to gain from SGI using PPC?
No they won't gain a dime. Remember, Apple doesnt make PPC, moto and IBM does. The ony way Apple would gain from SGI using PPC processors is if they made them themselves or somehow contributed to increased competition in the AIM space.
</strong><hr></blockquote>
Apple could gain a great deal if development of faster desktop CPU's is increased by Motorolla and IBM, and with every new customer that moves to the Power PC chip for use in a lower end workstation/desktop PC IBM and Motorolla have an increased incentive to do just that...
<strong>
Apple could gain a great deal if development of faster desktop CPU's is increased by Motorolla and IBM, and with every new customer that moves to the Power PC chip for use in a lower end workstation/desktop PC IBM and Motorolla have an increased incentive to do just that...</strong><hr></blockquote>
And there's an indirect benefit as well!
If you can increase the overall number of PPC -based systems that you ship, as well as the number of processors in each box, you can effectively invoke a minor improvement in the economies of scale which will decrease the cost that Apple has to pay for each CPU.
On top of that, an SGI-enhanced PMac Pro with multiple processors would have a higher street value than the norm, but in effect cost no more in fixed costs such as packaging or shipping - so in reality they should be more profitable in % terms than an eMac.
<strong>It's not really true that Apple's $4B cash isn't really doing them any good. That money ain't sitting in a savings account, or in a vault at Apple HQ.</strong><hr></blockquote>
Actually, in a sense ... it is. What that money does, is essentially prevent Apple from being bought out, and helps them weather out tough times.
<strong>Don't let the Hooligan suck you into his RDF vortex. He's clearly had too much Bass today (the world's finest beverage I might add).
I hope you're not referring to me as the Hooligan! I am far too much of physical coward.
Also, I wouldn't drink Bass if you paid me; now Sam Smiths (Tadcaster, North Yorks) - there's a beer, smooth is not a word that adequately describes the sensation!
Actually, it's probably a reaction to too much ice cream.
<img src="graemlins/lol.gif" border="0" alt="[Laughing]" />
Oh yeah, and whaddya call the guy to left SGI for Apple late on in the dev cycle of Maya. Richard somebody? I'm surprised his name hasn't cropped up yet in this thread ...
Aw well, I want somthing to render radiosity at print res without having to keep going away for the evening. Something is up on the processor front .. guess I'll just wait ...
Apple's been buying software companies, not hardware companies (well, Raycer, but that's a much tinier company than SGI).
If Apple doesn't have a plan for building hardware to compete with Intel in the next year or two, then it's too late. The rewards of buying SGI now wouldn't come to fruition until too late.
More likely, Apple is going to buy IBM. Yeah, they've got the money, they can do it!
<strong>Apple's not going to buy SGI...
Apple's been buying software companies, not hardware companies (well, Raycer, but that's a much tinier company than SGI).
If Apple doesn't have a plan for building hardware to compete with Intel in the next year or two, then it's too late. The rewards of buying SGI now wouldn't come to fruition until too late.
More likely, Apple is going to buy IBM. Yeah, they've got the money, they can do it!</strong><hr></blockquote>
True, but you could prefix your first sentence with "So far, ", because - until the purchase of the Macromedia product that became FCP - I wasn't aware that Apple was in the application software business, or specifically film/video post-production application software business.
Although I have no objection to learning from history, I would argue that using it as an absolute indicator for what will happen in the future is a bit of a dangerous business.
Ultimately, most corporate entities will execute any necessary action to survive & flourish: It's a demonstration of darwinian theory in action with the most successful examples being companies like M$ (from a development language to an OS to applications to games consoles), GE or Amazon. Survival means never standing still and very often taking the road less travelled.
The guy who used to run AMR (American Airlines) was once asked, something like: "If you were forced to choose, would you hold on to your aircraft and solely operate as an airline, or would you hold on to Sabre (the AMR reservation system)?" He chose Sabre, because it was a more powerful revenue earner and the running costs were a fraction of running an airline fleet. My point is that people don't always play the cards you think they will. Apple probably won't buy SGI, but that doesn't preclude an intellectual exercise to explore the possibilities if they did.
If you wanted to buy Sabre, you would have to buy AMR and then asset strip. If you wanted to buy Alias|Wavefront, the quickest way to do it is buy SGI and then asset strip, and whilst you're stripping take anything else that takes your fancy like NUMA or VOD.
The reason the plan works is because investors like a quick buck and can normally be persuaded to do anything for the right price, whereas a company's management may resist the idea of being eroded one product at a time because they understand the overall corporate strategy.
Sometimes, the act can be pre-meditated and sometimes it can be a reaction.
When BMW took control of Rover Cars here in the UK, there was little doubt that the company's CEO (Bernd Pieschstrieder who's now at VAG) was sincere about wanting to turn the brand into a complementary entity to the parent. He is after a all a nephew to Sir Alec Issigonis who designed the first Mini back in the 60s.
However, nearly a billion dollars of losses later, Bernd was gone (along with Wolfgang Rietzle who then went on to run Ford's PAG) and BMW's board threatened to liquidate Rover with extreme prejudice. The fact that Rover was referred to in Munich as The English Patient gives you an idea of the sympathies at the time.
However, BMW were smart (to the point of being devious) - they made sure they transferred all the knowledge of how to build a quality 4x4 from Land Rover, ultimately developing the X5 and soon the X3. Then they sold Land Rover to Ford, ironically landing back in the lap of the recently departed Rietzle, and recovered the vast majority of their losses in the process.
But the asset stripping wasn't finished: Selling Rover Cars to a management buy-out (for the princely sum of £1, I seem to remember), BMW chose to hang on to the Mini brand, which was their "big white hope" for Rover's recovery, and all of the historic brand names that Rover had acquired by being the successor to the old British Leyland (Austin-Healey, Triumph, etc). Rover got to hang on to MG.
Suffice to say, the Mini is selling so well in Europe that they can barely keep up in the factory and the X5 consistently wins best-of-class for road-going all-wheel drives: BMW is no longer considered to be in crisis.
Like I said, entities will do that they need to do to survive: It's carpetbagging in the 21st century. It may not be pretty, but I think that Apple are as capable of doing it as anyone given the right incentive.
To borrow a quote from the guy who founded the "Home Depot:" If you have a choice between buying an existing ailing competitor, or expanding on your own, expand on your own. Buying the ailing competitor means buying all their problems, including lack of morale and beaten-down employees.
One of the real problems with Apple buying SGI is that the company's already been stripped of most of its valuable assets (as mentioned above). Although some bits and pieces still have a lot of value (like A/W), the value of those bits are less than the cost of acquiring SGI and selling/shutting down the nonvaluable bits. I guess I should say "most likely less" since I haven't looked at any balance sheets... regardless, paying $500M is too much for A/W- I suspect A/W's yearly sales are on the order of $10-50M, so paying 10x yearly earnings is just out of line. Again- I haven't double-checked these figures, I'm just making them up for argument's sake. It would be interesting to get a better estimate from SGI's SEC filings.
As for NUMA (or other HPC) technology, SGI doesn't have a monopoly. There's lots of research going on at many academic and private institutions into "next generation" architectures, and plenty of companies which are working on them. IBM, as mentioned is one, but so are Fujitsu, NEC, AMD, and even Motorola. Plus "plenty more" smaller ones.
Sure, SGI has real-world existing shipping examples of very exotic and high performance machinery, but a lot of that is legacy equipment- it all runs MIPS! (OK, x86 is their lower end range, but we did say "high performance"
Other next-gen tech can be had from other suppliers for less. Apple is a member of the HyperTransport consortium, after all, and is presumably gaining plenty of tech from that. Both Moto and IBM are going RIO with future PPC designs... presumably Apple is gaining something from that.
Oh, and one more thing
In one of the investor phone call discussions last year, Jobs actually was asked whether Apple was looking at acquiring SGI, and said no...
But it's still very interesting to talk about, no doubt at all about that.
My 2¢,
-HOS
<strong>Good points! And interesting discussion this time around...
To borrow a quote from the guy who founded the "Home Depot:" If you have a choice between buying an existing ailing competitor, or expanding on your own, expand on your own. Buying the ailing competitor means buying all their problems, including lack of morale and beaten-down employees.
One of the real problems with Apple buying SGI is that the company's already been stripped of most of its valuable assets (as mentioned above). Although some bits and pieces still have a lot of value (like A/W), the value of those bits are less than the cost of acquiring SGI and selling/shutting down the nonvaluable bits. I guess I should say "most likely less" since I haven't looked at any balance sheets... regardless, paying $500M is too much for A/W- I suspect A/W's yearly sales are on the order of $10-50M, so paying 10x yearly earnings is just out of line. Again- I haven't double-checked these figures, I'm just making them up for argument's sake. It would be interesting to get a better estimate from SGI's SEC filings.
As for NUMA (or other HPC) technology, SGI doesn't have a monopoly. There's lots of research going on at many academic and private institutions into "next generation" architectures, and plenty of companies which are working on them. IBM, as mentioned is one, but so are Fujitsu, NEC, AMD, and even Motorola. Plus "plenty more" smaller ones.
Sure, SGI has real-world existing shipping examples of very exotic and high performance machinery, but a lot of that is legacy equipment- it all runs MIPS! (OK, x86 is their lower end range, but we did say "high performance"
Other next-gen tech can be had from other suppliers for less. Apple is a member of the HyperTransport consortium, after all, and is presumably gaining plenty of tech from that. Both Moto and IBM are going RIO with future PPC designs... presumably Apple is gaining something from that.
Oh, and one more thing
In one of the investor phone call discussions last year, Jobs actually was asked whether Apple was looking at acquiring SGI, and said no...
But it's still very interesting to talk about, no doubt at all about that.
My 2¢,
-HOS</strong><hr></blockquote>
I find your arguments far more cogent than a blank "Apple are not going to buy a HW company"!
As I have previously implied, even when I started the thread, "What if SGI are already committed to G5 and have already done much of the design and a significant element of the engineering to make that switch?"
Lets takes $25M as the earnings for A/W and multiply by 4. That's $100M of your $500M.
If, and I stress IF, SGI have already gone the G5 route, the cost of developing a similar - mature - range of "big iron" from Apple's point of view is difficult to be precise about, but let's take a stab: let's say you need 60 H/W engineers + (35 working on the actual systems, 15 working on the NUMA stuff, 10 working on miscellaneous stuff) plus 20 working on the software side to make OS XI NUMA capable all at reasonable Cupertino salaries of $80K/year potentially. So that's 80 people at 80K + project/design management (let's say 10 people at $100K), so that's $7.4M/per annum just on people.
Arguably, when all other factors (marketing, hardware, office space, admin, research, etc) are taken into account, the cost of the effort rises to $20M to $30M per annum: If it took 3 years to get to the same stage as SGI on "big iron", that would be a $100M effort.
So now, you've accounted for $200M of your $500M.
So what about the other $300M: As I have previously said, SGIs balance sheet lists around $167M in cash and equivalents, and (bizarrely) Property Plant and Equipment of $178M. Assuming you could dispose of 75% of the latter for book value: thats 167M + 133M or $300M. There's $107M of inventory (let's say you can sell 50% of that for 50% of value, which is conservative), that's $27M (although I think you could get $60M)
Simply settling the Accounts Payable and Acccounts Receivable ledger gets you another $25M, so now you're $50M in the black, short-term & long-term investments get another $90M and intangible assets (?) + Other Current Assets gets you $145M , which gets you to $285M in the black.
I would let the $300M of long-term debt hang around a little, which means I need to clear $500M of other liabilities. That puts the maths back to $215M in the red. And I'm not going to get into write-offs and tax clawbacks, despite the fact that they help my cause.
$215M to get rid of a competitor who is on "my turf" with near identical technology (assuming the G5 rumour is true), and whose presence can only be a contributing factor in getting me involved in an ongoing price & publicity war. Also they have sales of over $1B, which if I directly inherited would generate around $150M in profit in the first year. And I've denied access to A|W to my competitors who would rip me to shreads if they ever had the slightest opportunity.
Oh and you also have a more complete product offering than Sun Microsystems (he says rubbing his hands, and looking at his next victim in a sinister way) loss-making & asset-rich, my favourite! If you followed me into the dark side, by the time we'd finished the only people left standing would be Apple, IBM, HP & Dell. And the only people making proper computers would be Apple IBM and HP. And the only company not mainly reliant on a crap OS would be Apple.
Hmm, I think that's an interesting proposition.
[ 06-14-2002: Message edited by: Mark- Card Carrying FanaticRealist ]</p>
<strong>
Sorry, England's performance in the World Cup is causing me to indulge in flights of fancy - you should have heard the stuff I was thinking of on Friday.
Too bad they're going home after Saturday's game
I must admit that I konw little about SGI's HW and SW solutions, aside from the fact--as has been cleverly pointed out--that Apple could cherry pick some really nasty and advanced technologies and assets, but that's not what I wanted to focus on...
A friend of mine is a Mac System Administrator in the biggest technical university in my country; of course, most of the computer labs run on PC HW and SW, but his Mac evangelism is starting to show some promising results--especially after Apple introduced the Xserve. Well, Maya is the key application for the whole university and for this reason most of the time they buy new computers with Maya and little else in mind. Mac or PC is not really an issue--all they need is the best platform for Maya. If Apple were really to buy SGI and A|W they could also optimize and polish it like only Apple can--and this would immediately translate in bigger sales in this market segment. Assuming that what I described for this university is true more or less for many other tech universities in the EU, I think Apple could see much improved sales and profits both from Maya and from its ideal platform--ie the Pro Mac line...
And more Macs in schools mean more Macs in the student's homes. I know that in the US Apple's already a leader in this segment, but in Europe it really needs to wake up and start fighting the PC-oriented mentality (I'm still talking about large state-owned educational institutions) by introducing more compelling HW and SW solutions.
Being able to say "we're the best platform for Maya, and the next version won't even come out for Windows" would really be a good start...
ZoSo
Which G5? Which G6?
And, "Apple will get advanced hardware from IBM/Moto/nVidia/ATI ... " - Programmer, please don't make me cry.
engpjp
<strong>Which G5? Which G6?</strong><hr></blockquote>
i don't think this forum is about the imminent (or not) release of the g5. obviously apple isn't going to stay on the g4 forever. i think the g5 referred to is just a placeholder for "the next chip used in Apple Macintosh computers". the g5 may not yet exist, but it doesn't mean that sgi isn't still considering moving to ppc.
<strong>
And, "Apple will get advanced hardware from IBM/Moto/nVidia/ATI ... " - Programmer, please don't make me cry.</strong><hr></blockquote>
Despite the slagging they tend to receive around here, those companies are producing advanced technologies. An Apple-ized version of the POWER4 technology with a RapidIO or HyperTransport link to an InfinitiBand interconnect fabric, and you've got a heck of a clustered NUMA machine. Or if the IBM thing isn't true then the next chip from Motorola with its RapidIO interface. The next generation graphics cards from nVidia & ATI will be on the Mac and they are extremely powerful, and Apple is on the ARB helping move OpenGL forward to take advantage of these new GPUs.
Its going to be an interesting ride, and I don't think that Apple needs to spend huge amounts of money on acquisitions or risky projects to leverage what is going on throughout the industry. Apple is really about integration, not designing the new low-level technologies... leave that to the companies that make their living there because it is a nasty place to dive into. By taking advantage of industry standards Apple reduces the pain caused by being the odd-ball on the fringe of the computing industry. They can build machines that fit right in and shine because they are spending their money making sure that they've got the spit-and-polish that others can't afford to add.
You have some very interesting figures.
However, I still think that you're underestimating legacy costs, maintenance costs, and future development costs.
To borrow the usual car industry analogy- Ford bought Jaguar a while ago, and then proceeded to pump billions of dollars into it to build new Jaguar product. It will take decades for Ford to recoup both the initial investment and the development costs of the purchase. It's very easy to argue that this ROI will occur way too slowly, and that the money would have been better spent elsewhere, say on Ford's own product line.
The same argument has been applied to GM's creation of Saturn (the billions spent could have revamped, say, Chevy, and been better spent with a faster ROI). And also the same argument has been used for GM's "roboticization" during the 80s- where they spent in the tens of billions, and could have just outright purchased Toyota for the same price, no doubt a better investment.
For Apple to buy out SGI puts them in the same position- even assuming SGI has begun a migration to PPC (which we don't even know), the costs of migrating SGI's existing user base to PPC haven't even been estimated yet, and the costs of just dumping SGI's user base is larger than the cost of buying SGI and shutting it down completely- since you've now pissed off that user base who now won't become future Apple customers...
Worse, assuming Apple wants to "bring SGI's customers back into the fold" (sorry- borrowing from the letter I got from Jobs when Apple bought out PowerComputing: my PowerCenter r0ck3d!), Apple will need to continue a massive investment into future SGI hardware... since the Origin will need a PPC based replacement which can offer at the least, similar performance (at similar price!). I can understand the desire to have our hypothetical PPC Origin technology "trickle down" to Apple's consumer line, but it's still a very expensive way of getting next-generation technology. Not when companies like nVidia, ATi, Motorola and IBM are happy developing it on their own...
I do like your estimated figures though, I just disagree with them representing all the possible costs.
As always, my 2¢
-HOS