Belluzzo headed to Microsoft?

Richard Belluzzo resigned abruptly as chairman and CEO of computer maker SGI, and is expected to be tapped to run Microsoft Corp.'s high-profile Internet operations.

People familiar with the matter said that Belluzzo, 45 years old, will join Microsoft's (Nasdaq:MSFT) highest circle of executives, managing interactive operations that include its Microsoft Network service. The software company has been searching since last November for a new leader for the Internet businesses, which are at the front of an increasingly fierce battle with America Online Inc. (NYSE:AOL).

Belluzzo couldn't be reached for comment. A spokeswoman for Microsoft declined to comment.

The departure is a blow for SGI, a long-struggling computer maker that recruited Belluzzo 19 months ago to lead a turnaround effort. The Mountain View, Calif., company said it was surprised by his decision to take what it described as a "non-CEO" position at another company; it didn't identify that company but said it doesn't compete with SGI (NYSE:SGI).

SGI named board member Robert Bishop, a former SGI executive, to succeed Belluzzo.

A winning formula
SGI has been struggling to find a winning formula since it fell from Silicon Valley's fast track several years ago. The company pioneered the market for high-performance desktop computers and servers that generate realistic graphics for use in engineering and movie special effects, including the dinosaurs in "Jurassic Park."

Belluzzo joined SGI in January 1998 from Hewlett-Packard Co. and pushed the company into new areas that included developing a line of computers on Intel Corp. chips and Microsoft software. On Aug. 10, however, SGI effectively repudiated that strategy, announcing a restructuring that included selling off that product line along with its Cray supercomputer business. SGI also said then that it will lay off between 1,000 and 1,500 of its 9,000 workers, or as much as 17 percent of its work force.

In an interview at the time, Belluzzo described the changes in positive terms, saying they built on his earlier restructuring efforts and should help bring "focus" to SGI, which recently surprised Wall Street with a better-than-expected second quarter.

Bishop, a longtime SGI manager who joined its board in 1993, said he supported the latest restructuring plan and is committed to executing it. "For me, this is an enormous challenge," he said of his appointment. "It comes at a very critical time when we have announced a major shift in our strategy."

Michael A. Gallup, general manager of North American sales at Compaq Computer Corp., said Bishop is known as a whiz at setting up sales operations in foreign countries. "It's quite a strength," said Gallup, who, like Belluzzo, worked at the former Apollo Computer. "The question is, how applicable is that in the world of SGI today?"

A strong background
Belluzzo, by contrast, is known for a strong background in operations and finance, and is credited with pushing for measureable results in bolstering that company's huge printer operations. Microsoft could use that kind of focus on its Red West campus, home of many Internet operations that have lost money as well as some that are highly successful.

The software company this summer said it was considering issuing a tracking stock that could separately reflect the value of its Internet operations. People familiar with the matter said yesterday that the tracking stock idea appears dead for the moment. It is more likely, they said, that Microsoft will choose to sell or spin off some operations, such as its Expedia online travel service.

Microsoft, hoping to bolster its standing among Web companies, looked outside the company for an executive with broad media experience. It also unsuccessfully tried to interest Brad Silverberg, a former Microsoft vice president who has been on leave since 1997. The Internet operations are now being jointly run by two executives, Jon DeVaan and Brad Chase.

Belluzzo is expected to start at Microsoft around Sept. 1, and hold a title of executive vice president, one person familiar with the situation said. Though he has mainly focused on computer hardware, he had longtime connections to Microsoft while at HP.

One connection is through Richard Hackborn, a retired HP executive who recently agreed to become its chairman. Hackborn, widely considered one of Belluzzo's mentors, sits on Microsoft's board of directors. Hackborn declined comment.

"Rick is very personable and very straightforward," said Robert Frankenberg, a former HP executive who is now chief executive officer of Encanto Networks Inc. "He's a very good leader."