Cray Casts Wider HPC Net with Acquisition

Looking to expand its portfolio, supercomputer maker Cray announced Wednesday that it would acquire privately held
OctigaBay Systems in a cash and stock deal worth about $115 million.

A regular sweetheart of government contracts, Seattle-based Cray makes
systems that dot the Top 500 list of fastest supercomputers. But to compete
with larger, more established companies such as IBM , HP and Sun , Seattle-based
Cray said it needs this acquisition to help commercialize its now famous “Red Storm” system.

Enter Vancouver, British Columbia-based OctigaBay, which has been
developing a more user-friendly high performance computing (HPC) system.
Previewed in November 2003, the company’s 12K system embeds both a high
speed interconnect and application accelerators. The system also comes with
self-monitoring, self-healing and management features.

The boards of both companies approved the transaction, which is expected
to close within 60 days pending the usual government and shareholder
approvals.

Early shipments of the OctigaBay product are expected in the second half
of 2004, with general availability in early 2005. Pricing, to be announced
later this year, is expected to range from under $100,000 to about $2
million. Cray said for the rest of this year it is planning on spending $2
million per quarter to cover the cost of OctigaBay’s product development
efforts and product launch. Cray chairman and CEO Jim Rottsolk said the
price is worth it.

“The combined company will increasingly benefit from the growing
realization that purpose-built HPC systems like Cray’s are more efficient
and cost-effective than general business computers for the high performance
computing market,” Rottsolk said in a statement.

The acquisition is also a boon for AMD as Cray’s Red
Storm original and commercial-grade systems are based on the No. 2
chipmaker’s Opteron processors featuring HyperTransport technology. The
original Red Storm runs on SUSE Linux operating environment and is a
massively parallel processing (MPP) supercomputer developed for the
Department of Energy at its Sandia National Laboratories.

When completed, the Red Storm will be used for computer simulations of
the U.S. nuclear stockpile and other applications and will be the fastest
super computer in the U.S.

Cray said it hopes to recreate the high-bandwidth, low-latency internal
switching architecture with a more attractive price tag.

“We look forward to working with the combined company as the ‘Red Storm’ and OctigaBay 12K projects near completion, and many other compute-intensive system wins are announced,” AMD vice president Marty Seyer said in a statement.

To complete the acquisition, Cray said it will exchange about 12.7
million shares and just under $15 million dollars for all outstanding
OctigaBay shares and will assume approximately 400,000 employee options.

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