Cray wraps 2010 on high note

Top-flop act

Supercomputer maker Cray has turned in one of the best years in its history, nailing the high end of its revenue targets for both the fourth quarter and for the full 2010 year, and turning a profit as it had promised to.

It also looks like 2011 will have a very similar shape and feel to it, although growth will come a little less easily and profits will be under pressure as some DARPA development funds diminish for the company's future Cascades massively parallel supercomputers.

In the fourth quarter ended in December, Cray's total revenues were $219.4m, up by a factor of 2.5 compared to the year-ago period. Product revenues more than tripled to $197.3m, though services revenues contracted by 4.1 per cent to $22.1m.

Part of the reason for the drop in service revenues is that Cray's Custom Engineering unit – which does consulting, bespoke systems, and technology integration for Microsoft and a number of other clients – shifted away from services and towards custom systems. Product revenues were really driven, however, by acceptances for large XE6 systems.

The XE6 machines started shipping last summer with AMD's twelve-core Opteron 6100 processors, the Gemini XE interconnect, and the Cluster Compatibility Mode (CCM) layer that makes Linux-based applications think the proprietary XE interconnect is a normal Ethernet stack. This emulation mode shaves a few per cent off performance, but means that HPC shops do not have to recompile Linux applications written for the Ethernet-TCP/IP-MPI stack commonly used in clusters.

For the full year, Cray had total revenues of $319.4m, up 12.4 per cent, with services revenues down 5.5 per cent to $80.3m. The profits generated in the fourth quarter more than made up for losses in the first quarter of the year, allowing Cray to write $15.1m in black at the bottom line for all of 2010.

In a conference call with Wall Street analysts, Cray president and CEO Peter Ungaro said that the company shipped more computing cabinets in the second half of 2010 than it had done in the prior 18 months combined, and added that for all of 2010, Cray shipped an aggregate of 7 petaflops of number-crunching oomph to its customers – that includes the prior XT6 and XT6m machines, which use the slower and less-scalable SeaStar2+ interconnect as well as the new XE6 and XE6m machines launched in the middle of last year and a smattering of small machines, storage, and custom boxes.

Cray has now installed four systems that break the petaflops barrier, two of them in 2010. Cray has another petascale XE6 box that shipped in the fourth quarter of 2010, which Ungaro said would hopefully be accepted (and therefore have its revenue booked) in the second quarter of 2011.

Cray is expecting to deliver an upgrade to the XE6 and XE6m systems this year, incorporating Advanced Micro Devices' 16-core Interlagos processors into the machines. (The XE6m is a less-scalable version of the XE6 that comes with a lower price tag.) By the end of the fourth quarter, Cray also expects to integrate GPU co-processors into the XE6 and XE6m boxes to help boost their number-crunching power.

Cray is currently working on its future Cascades parallel systems, which feature a new interconnect called Aries in its development phase. The US Defense Advanced Research Project Agency ponied up $36.5m in R&D funds for three Cascades milestones in 2010, and Brian Henry, Cray's chief financial officer, said in the call that DARPA is expected to shell out $24m in R&D reimbursements across two Cascades milestones in 2011. Having less DARPA money will put pressure on profits (but not revenues) this year. The Cascades systems, presumably to be called the XE8, and the Interlagos Opteron bumpers, the XE7, are expected to hit the market in 2013.

The Custom Engineering division was a bright spot in 2010, more than doubling revenues to $62m in 2010. The unit, which was started in 2008, had $10m in sales that year and $30m in 2009. Cray's XMT massively threaded systems, which are great at chewing through text and voice data streams, have been put into the CE unit and are helping to pump up sales.

Cray has a follow-on XMT-2 system in development, which El Reg speculates will be putting the XMT-2 processor into a G34 socket used by the Opteron 6100s and slapping them into the XE6 machines. News and legal database provide LexisNexis is looking at using the XMTs and so is Netezza, the data warehousing appliance maker acquired by IBM for $1.7bn back in September 2010. Netezza wants to pair XMTs with its FPGA-accelerated distributed database blade servers.

It is hard to project growth rates for the Custom Engineering biz, but the trend has been triple then double, so a 50 per cent growth rate fits that curve nicely. All Ungaro would say is that Cray is hoping for "double-digit" growth in Custom Engineering in 2011.

Ungaro added that Cray had an unusually high success rate for its deals in 2010. "It is going to be hard to repeat what we did in 2010 in the core supercomputing business," he explained, saying it could be down a bit. "If we could keep up the pace, we'd be in fat city."

Given all of this, Cray told Wall Street to expect revenues for the first quarter to be on the order of $35m to $40m, and that revenues would ramp up through the third quarter with about half recognized in the final quarter of this year. The company is projecting sales of $320m to $340m, which works out to anywhere from 7 per cent down to zero percent growth. Henry said, nonetheless, that Cray is optimistic that it would be profitable in 2011. ®