Sequoia delays PA-RISC project

Electronic News, Dec 21, 1992 by Craig Stedman

MARLBORO, MASS.--Sequoia Systems Inc.'s development of a fault-tolerant system based on the PA-RISC architecture is expected to be delayed by at least six months from its original late 1993 timetable as a result of new layoffs implemented by the cash-strapped company.

The cuts, which followed a decision by OEM customer and PA-RISC owner Hewlett-Packard to not go through with a proposed deal to provide Sequoia with badly-needed additional funding (EN, Dec. 7), also may affect a Sparc-based fault-tolerant R&D program being done jointly with Toshiba.

The Sparc machine had most recently been targeted for introduction in the first half of 1994, about six months after the PA-RISC system. While Toshiba is to handle most of the actual engineering, Sequoia's contracts with HP require that the PA-RISC hardware be released first.

Richard Goldman, Sequoia's chief financial officer, said the workforce reduction from 295 to 170 won't force the company to drop any major R&D programs at this point, "but there will certainly be some delays." The PA-RISC work specifically is "likely" to be affected.

Mr. Goldman wouldn't provide a definitive new schedule for completing the PA-RISC machine, which HP has been planning to resell as an addition to the 68040-based Sequoia systems it now market. He noted, though, that he is "sure it will go until at least the mid-1994 timeframe."

HP's future intentions regarding Sequoia and its hardware have become unclear in light of the Palo Alto company's rejection of the proposed funding deal, a move that prompted Sequoia to start looking for investment banker to scout potential financing sources.

Richard Sevcik, worldwide general manager of HP's systems and servers group, wouldn't discuss the reasons for rejecting the deal. He indicated only that the talks mainly involved the possibility of HP increasing its purchases from Sequoia and then holding the systems as inventory.

Mr. Sevcik also declined to detail HP's plans for ensuring that it has access to a PA-RISC fault-tolerant machine in the future. "We're looking at all options, but right now we don't see the need to exercise any of them," he said.

HP, which holds an eight percent equity interest in Sequoia, has rights to license the company's technology and has indicated that it might be willing to take over the PA-RISC project if necessary. Industry observers also see the potential for HP to turn instead to Sequoia rival Stratus Computer, which also plans to base future machines on PA-RISC.

Asked about the possibility of a shift to Stratus, Mr. Sevcik said: "I can't comment about that." A spokesman for Stratus, which plans to ship its first PA-RISC systems in 1994 or 1995, said only that it is "watching the situation very closely."

For now, HP's position "continues to be that Sequoia is a strategic supplier for us," Mr. Sevcik said. He noted, though, that HP for the time being is leaving it to "the market" to decide the future of the troubled fault-tolerant vendor.

"I believe the market is going to determine whether Sequoia hangs on or not, and my speculation isn't really relevant," Mr. Sevcik said. "We have to watch how Sequoia is managed, though I have a lot of faith in the people they have in place now" following recent management changes.

Sequoia made a further change last week, naming Cornelius McMullan as its new president and chief executive. Mr. McMullan joined the company in November as VP of worldwide sales and strategic accounts, after previously heading Prime Computer's now-shuttered systems unit.

The top job at Sequoia had been held jointly by Mr. Goldman and outside director Francis Hughes Jr. following the October demotion of former chairman and CEO Gabriel Fusco, who later left. Mr. Goldman remains as CFO while Mr. Hughes continues as Sequoia's chairman, though Mr. McMullan reports to the board as a whole.

Sequoia also restated its results for the fiscal year ended June 30, dropping its revenues from $65.7 million to $62.6 million and increasing its loss from $3.5 million to $3.9 million. The company has had to restate its financials on several occasions after not getting payments for orders it had already booked as sales.