Supercomputer maker Cray's business softened in the first quarter of 2011 because of international government-budget issues, but it did have a bit of good news to lessen the disappointment of investors thanks to a Scottish super named for a Trojan warrior.

In the quarter that ended this March 31, Cray had a ridiculously easy compare because business was awful in the year-ago period. Product sales rose by 84.2 per cent year-on-year to $16.7m, and services revenues were up 19.9 per cent to $23.2m. Overall revenues were up 40.4 per cent in the first quarter, to $39.9m.

President and CEO Peter Ungaro said in a conference call with Wall Street analysts that revenues for products were in line with expectations, and that revenues for services were a little ahead of plan for Q1, and services margins were up more than 50 per cent.

Thanks to payments for machines delivered during last year's bang-up fourth quarter, Cray more than doubled its cash to $122m. In the fourth quarter of last year, Cray more than tripled product sales to $197.3m and held services revenues flat at $22.1m.

That killer fourth quarter was when the bulk of the 7 petaflops worth of XT6 and XE6 supercomputers were accepted by their buyers, and therefore the money could be put on the books. For the full 2010 year, Cray had of $319.4m of total sales and brought $15.1m to the bottom line – one of the best years in its history.

Ungaro was hoping to repeat 2010 this year with a major upgrade cycle in the second half of the year and maybe with a little bit more growth. However, the delayed Federal budget in the US as well as issues in Japan even before the earthquake and tsunami have caused Cray to be more cautious about its prospects.

Some of the company's Custom Engineering division work, where it does bespoke systems and data center design as well as software work and the nearly hand-crafted XMT-2 massively threaded parallel super from its Tera Computer heritage, got pushed out in the past several months. Unlike product sales, which Cray thinks it can win back into 2011, this business won't come back.

And thus, Cray is reducing the low end of its revenue guidance for 2011 by $20m to $300m, and now says that it expects for Custom Engineering to only bring in $40m to $50m this year. The top-end of Cray's revenue guidance remains unchanged at $340m, which Ungaro said was a reflection that the company believed that it could make up for the loss in Custom Engineering and other services sales in 2011 with higher supercomputer hardware sales.

Those sales will be driven by upgrades of XT6 systems to XE6 machines using the "Gemini" interconnect fabric as well as processor upgrades for XE6 machines in the second half of this year, swamping out the twelve-core Opteron 6100 processors for Advanced Micro Devices' sixteen-core "Interlagos" Opteron 6200 processors. This is, in fact, what the University of Edinburgh is planning to do in the second half of this year.

Scotland's Hector supercomputer has 20 cabinets based on the XE6 blades and interconnect, and using the Opteron 6100 processors; it's rated at 367 teraflops of aggregate peak performance. Cray has inked a deal to first add another 10 cabinets to the box, boosting performance to 488 teraflops. Then, when the Opteron 6200s are available in the third quarter, Cray has a deal to put them in all 30 of Hector's cabinets to boost its performance to 827 teraflops.

Based on core counts alone, Hector should weigh in at around 651 teraflops if the clock speeds of the Opteron 6200s were kept the same as the 2.1GHz speed used in the current Opteron 6100-based machine. This suggests that Hector will be using sixteen-core Opteron 6200 processor running at around 2.7GHz to get the performance Cray says it can deliver.

Cray is hoping for a number of big deals like this one to make 2011 another bumper year. It's also counting on its integration of Nvidia GPU coprocessors into the XE6 systems. The exact nature of this integration has been kept secret, but what is known is that Cray is working on a custom board design to marry GPUs with its blades and Gemini interconnect; it is not working with AMD to support its FireStream co-processors.

Ungaro also said that there is a $50m deal in the works with an unnamed customer that will be for an XE6 upgrade – it could be Oak Ridge National Laboratory for its 20 petaflops "Titan" supercomputer, but Cray is not confirming or denying that. And the first XMT-2 thread-monster, which is designed to do pattern recognition on a vast scale, will go into the Swiss National Supercomputing Centre (CSCS) at the end of this quarter.

Interestingly, Ungaro said that its business in Europe was holding steady, even as it slowed in the US due to the Federal budget being six months late. "You can't make up lost time for the Federal budget," he explained.

In the Asia/Pacific region, sales are expected to slow for a number of reasons. The slippage in Japan is due to product acquisition plans by the Japanese government being pushed out to 2012, and other Asian nations have also delayed plans, though perhaps not so far out, if Cray can do some fast talking and product-upgrade shipping.

Cray's chief financial officer, Brian Henry, said that the company expects sales of $65m to $70m for the second quarter, and that once again, more than half of its revenues for 2011 will come in the fourth quarter. Maintenance and support revenue is expected to account for about $60m in 2011, Henry said.

Ungaro said that sales in Custom Engineering division would flatten in 2011, "taking a breather," with double-digit revenue expected to resume for this bespoke supercomputing unit in 2012. Henry made sure everyone knew that Cray expects to be profitable this year, as it was last year. ®

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