LNXI (Linux Networx) is done

SGI acquired the assets yesterday. Sad, LNXI was one of the good ones. Like us, a real HPC shop. They got killed (my guess) by going after huge government systems with long drawn out acceptance tests. Which killed their cash flow, and put them into an unsafe business area. Look, HPC is just like any other business, you have to be able to distinguish good business from bad business. Some business you cannot afford to pursue, the cost of winning is simply too high. Call that business, Pyrrhic business. The wins come at such a huge cost to you, that losing would have been simply better for your business.

It is worth thinking about that as the commoditization of HPC has reached its pinnacle. It is hard to earn a living selling HPC systems. Margins of 2-3% appear to be common these days. So for a 3% margin on a $100k system, we are looking at $3k. This driving of the margin into the ground is a direct result of sellers who are willing to buy business,. effectively pay their customers to take their product. Business lives, and dies, from margin. Make it too low, and companies, like LNXI will starve. Make it too high, and fewer people will buy your stuff. There are some companies, online now, that are happy to do this in order to capture the revenue. When you sell a few million servers and desktops a year, you can, in a holistic sense, afford to lose money on a few. Especially if these few are used to prevent competitors from getting the revenue. Drives them out of business. Quite predatory, but no one ever said business was anything other than a contact sport. LNXI was trying to out Dell, Dell. LNXI was a white box vendor. This was not a wise choice. LNXI finally got it that it needed to be a solutions vendor. Well, SGI now owns their assets. What will SGI do? Who knows. They are also trying to out-Dell Dell.