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Cray gears up for big Q4, shrugs off US.gov debt worries

Waiting on Opteron 6200s

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Trying to cram a half year's worth of business into the final few weeks is no mean feat. And if it were not for the fact that supercomputer maker Cray already did it once already, in 2010, then Wall Street would probably be all kinds of jumpy about Cray trying to do it again here in 2011.

But as it turns out, last year was a much tougher year, engineering-wise, than this year will be. The "Gemini" XE interconnect and Cray Linux Environment, a tweaked Linux that can make applications think they are running on an Ethernet-based cluster even though they are running on the Gemini network, were the hard bits of hardware and software engineering that went into the XE6 systems that allowed Cray to make its numbers in 2010.

This year, all that Cray had to do was drop a new 16-core "Interlagos" Opteron 6200 processor into the XE6 system and deliver a variant, called the XK6, that puts Nvidia Tesla GPU coprocessors on the XE6 blades, one per CPU socket and delivering 83 teraflops per rack of combined ceepie-geepie number-crunching oomph.

In a conference call with Wall Street analysts going over Cray's second quarter financial results, Cray president and CEO Peter Ungaro said that the updated XE6 with the Opteron 6200s and the XK6 hybrid supers would both ship before Cray hosts its third quarter conference call in October. And these machines are a big part of Cray hitting its targets of between $300m and $340m in revenues and being profitable for the year.

In the second quarter, things look a lot better this time around then they did a year ago, but Cray still booked a loss, even with the US Defense Advanced Research Projects Agency kicking in $12m of research and development offset dough for the future "Cascade" kicker to the XE6 system. These Cascade machines will be based on a new interconnect called Aries, which will have much more bandwidth, more scalability, and allow for Cray to support both Xeon and Opteron processors if the rumors are right.

Cray booked $47.7m in product sales in the quarter, more than a factor of five higher than in the year-ago period when Cray was in the middle of launching the XE6 machines and no one was buying nothing. Services revenues in the quarter, including bespoke products from its Custom Engineering division, were up 4 per cent, to $20.3m. Total sales came in at $67.9m, up by a factor of 2.4 compared to Q2 2010. Cray had a net loss of just under $3m, which was better than the $6.6m loss it had a year ago.

Cray ended the quarter with $131.8m in cash, and Ungaro said that the company would be burning cash to build up parts inventories for the onslaught of sales in the fourth quarter, which will comprise more than half of Cray's total revenues for the year. Brian Henry, Cray's CFO, said in the call to expect sales of around $35m in the third quarter, which means Q4 should have somewhere between $157m and $197m.

One of the big deals that Cray is trying to land – and has not yet landed according to Ungaro, but is getting closer – was upped from an estimated $50m last quarter to $60m this quarter. This deal, which presumably is for an XE6 system but which could be an XK6 or a combination of machines, is expected result in delivery and acceptance of the iron in the fourth quarter, which means Cray will get paid then.

Cray is expecting Custom Engineering to deliver about $40m in sales this year, and one of the key products there is the XMT massively threaded parallel super, which Cray is trying to position as a big data chewing box that can compete with other data munchers like Hadoop clusters.

The one big variable out there – the Federal budget impasse in Washington, DC – is not a big factor for Cray. While Ungaro said that the delay in passing the Federal budget in the US earlier this year put the damper on some projects, particularly in Custom Engineering, the big HPC projects that Cray is taking down in Q3 and Q4 of this year already have their money and momentum behind them.

"Like most of America, we are watching this unfold in front of us without much clarity," Ungaro said of the new impasse about raising the US government's debt ceiling and cutting expenses in future budgets. "But the projects we have in place right now are so far into flight that we don't see a lot of impact."

Of course, 2012 could be a whole new ball of wax, and Ungaro admitted as much. ®

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