Tell me if you've heard this story before.

Computer graphics were borderline impossible. So in the 1970s, a man by the name of Jim Clark made them more possible. These computers got sold not for thousands, or even tens of thousands, but hundreds of thousands of dollars.

Yet these products were a steal. That's because they ran computer aided design software. CAD replaced rooms of draftsmen. Those specially skilled workers cost even more than the SGI machines.

And so the company raked in billions a year.

SGI Computers at Square in the mid '90s – this setup cost ~$110,000 (source)

But times changed. 3dfx sought to create cheaper cards. Whereas SGI sold nothing less than $5000, their younger upstarts sold cards starting at $500. Less capable for sure, but within reach of a hobbyist.

Silicon Graphics guffawed at the upstarts' graphics products. But the revenues were no laughing matter. SGI would eventually start to tumble as the cheaper cards became "good enough."

Management didn't believe this as it happened. Their computers were more expensive but they were also a lot better. The award winning work on Terminator 2 could have only been done on a $100,000 SGI workstation: why would you want anything less?

To cement their throne at the pinncale of high end computing, SGI would buy Cray in the early '90s.

SGI IrisVision, a "budget" card for DOS starting at $5,000

Much like DEC, they couldn't think downmarket. Everything was up market. Their cost structures demanded large teams to design them, big factories to pump them out, and a sales force to go sell them. A piddling $500 card just wouldn't support it.

By contrast, NVIDIA, ATI, and 3dfx created a unique structure whereby they didn't even build their products. Instead that got outsourced to third party distributors who contracted out to TSMC. I suspect video games save them a lot on marketing because they served as technical demoes. The only expense was in designing the product.

And so SGI crumbled. Eventually Google bought their snazzy headquarters in Mountain View.

Old SGI Headquarters, now the home of Google

If you want to learn more, I highly recommend the computer history museum oral history with Jim Clark, a cofounder.

Also be sure to read this excellent piece by Filfre also on SGI.