Cray's Q4 whacked by AMD's Opteron delays
Déjà vu all over again
Cray is going to miss its revenue targets for the fourth quarter, the company warned Wall Street this morning before the markets opened, and it has pointed its finger (without naming names) directly at its main processor supplier, Advanced Micro Devices, as the cause of the miss.
For the past several years, Cray's sales for the year have been heavily weighted toward the fourth quarter and dependent on the shipment and qualification of machines either using new Cray interconnect processors, new processors from AMD, or both. This time around, Cray had its own XE interconnect chips all lined up and it was AMD's delayed launch of the 16-core "Interlagos" Opteron 6200 processors that caused a traffic jam as Cray tried to sell, build, and qualify some monster clusters so their revenues could be booked in the fourth quarter.
In a statement, Cray said that system acceptances "were adversely impacted by further supply issues related to a key component," and with all of the other elements of the Cray XE6 system shipping – the system boards, interconnect chips, and operating environment – the only piece that was delayed was the Opteron 6200.
The Cray XK6 CPU-GPU hybrid machine launched in May last year  is basically an XE6 with half of its Opteron 6200s removed and replaced with Nvidia's Tesla X2090 GPUs, and it is this machine that was the hot seller for Cray in the second half of 2011. But in the supercomputer racket, delivery does not mean you can book revenue. Customers have to test and accept the machine before you can put it on the ledger. This takes time, and Cray's time ran out in Q4.
AMD formally launched  the Opteron 6200s for four-socket servers and their two-socket baby brother, the "Valencia" Opteron 4200s, back in mid-November. While the Opteron 6200 chips started shipping  in August, GlobalFoundries has had issues ramping up its 32 nanometer wafer baking processes throughout 2011 and could not deliver the quantities that AMD expected on schedule .
GlobalFoundries is the owner of AMD's former fabs in Dresden, Germany, which were spun out  in October 2008, and it will be interesting to see if AMD shifts future Opteron production to Taiwan Semiconductor Manufacturing Corp, graphics chip ATI's long-time fab partner (ATI was eaten by AMD years back) and the manufacturer of a number of AMD's Fusion hybrid CPU-GPU designs.
Cray has been warning all year that the fourth quarter had a number of potential outcomes, and having acceptances of big machines using the new Opteron chips slip into 2012 was always one of them.
"With incredible efforts from our employees and our customers we were able to complete the vast majority of our system acceptances, but due to delays related to a key component of our systems we weren't able to complete our planned acceptance at Oak Ridge," Peter Ungaro, president and CEO at Cray, said in the statement. "This acceptance is currently in process and we expect to complete it in the first quarter of 2012. We previously expected to have record revenue in 2012, and with this change in timing we have increased our outlook accordingly."
With regard to Oak Ridge, Ungaro was referring to the initial phases of the "Titan" hybrid XK6 ceepie-geepie machine  that the US supercomputer lab has commission Cray to build and scale up to 20 petaflops.
The deal involves upgrading a portion of the current "Jaguar" machine – which is a mix of older Cray XT4 and XT5 machines – using older Opteron processors that is rated at 1.76 petaflops. The Titan machine will be built in phases, starting with swapping out the XT4 and XT5 blades for the XK6 blades and putting in 960 Tesla coprocessors in a subset of the nodes.
This work was supposed to be completed by the end of 2011 and accounted for $60m in revenues for Cray; scaling up the Titan system and filling it up with the future "Kepler" family of GPUs from Nvidia (which are also running late) will bring Cray another $37m sometime in the second half of 2012.
With the first phase of the Titan upgrade not booked, Cray had to knock back its revenue guidance. The company said this morning that it expects for fourth quarter sales to be in the range of $230m to $240m and for operating expenses to come in at around $95m and that it will book an operating loss for the year.
Back in July 2011 , Cray was saying it could rake in $300m to $340m and be profitable, but with the Opteron 6200s delays, in November 2011  Cray said it had to lower its guidance to $290m to $320m, even after adding the Titan deal into the mix. The company said it was still possible to be profitable at that range. With Titan not adding any revenue in Q4, profit in 2011 is no longer an option. (Cray has not yet announced when it will report its Q4 2011 figures.)
Looking ahead to 2012, Cray said that it expected sales would be between $400m and $420m, with about a quarter of that total coming in the first quarter and the rest heavily weighted towards the end of 2012. The company expects total operating expenses to rise to $120m and to be "solidly profitable" for the full year.
Given how issues at GlobalFoundries can ripple through AMD and whack Cray like a towel snap, it's not hard to see why Cray's future "Aries" interconnect for massively parallel supercomputers will stop linking to x86 processors through Advanced Micro Devices' HyperTransport ports on Opteron processors and move to PCI-Express 3.0 links.
This will allow for the future "Cascade" systems based on the Aries interconnect to use either Intel Xeon or AMD Opteron processors and to connect coprocessors of many sorts directly into the Aries interconnect. Cray was burned in 2007 by delays in the Opteron processors and then again last year. History is not going to three-peat itself. ®