In 1999 Silicon Graphics Inc. (SGI) said it would lay off up to 17% of its workforce and sell or spin off several divisions, including its Cray supercomputer unit, as the computer maker faces an increasingly difficult market. Yesterday's announcements, made before an analysts' meeting scheduled for New York, were a setback for Richard E. Belluzzo, brought in 1998 from Hewlett-Packard Co. to turn around SGI. While SGI had a sterling reputation for its graphics-based workstations, used to create special effects for many movies, it had been badly outmaneuvered in the high end of the market by such competitors as Sun Microsystems Inc., and was losing sales in the low end to generic PCs.
a. How do the layoffs in this situation suggest that SGI's strategy has failed?
b. As a market analyst, would you interpret these layoffs to be good news or bad news?