Cray Shares Rise on Unexpected Profit from New Supercomputing Contracts

Seattle-based supercomputing company Cray (NASDAQ: CRAY) surprised analysts this morning by turning a modest profit in the second quarter, and was rewarded with a 12 percent bump in its stock price today.

Cray said today its revenues for the quarter ($62.7 million) increased by 34 percent compared with the same period last year ($46.7 million). That sales performance was enough to lift Cray to a profit of $3.4 million, compared with a $6.4 million loss it reported in the same period a year ago. This translated to a 10 cent per share profit in the quarter, which handily beat the consensus expectation of analysts, who forecasted a break-even quarter, according to First Call.

It has been a long road back for Cray, as I reported last week in an in-depth profile of the company. CEO Peter Ungaro told me Cray has become debt-free as of this spring (it had been saddled with $80 million of liabilities), and has been boosting its revenues through an aggressive three-pronged business strategy: selling high-end supercomputers to national laboratories, performing custom engineering and services, and selling lower-end machines to corporate customers through partnerships with companies like Microsoft and Intel. This strategy has been paying off handsomely, as the company announced several new contracts as part of its quarterly report—and this puts the company on sound enough footing to be profitable for the full year in 2009 and beyond.

Last month, Cray was awarded a multi-year contract with the Department of Energy’s National Energy Research Scientific Computing Center at Lawrence Berkeley National Laboratory. The contract, worth more than $50 million, includes the delivery of a Cray XT5 supercomputer, which will be upgraded to a future-generation Cray machine. And just this week, Cray received a contract to upgrade its “Jaguar” machine at Oak Ridge National Laboratory. Jaguar, which runs scientific applications at a rate of more than one petaflop (quadrillion mathematical calculations per second), will be upgraded to exceed two petaflops, which would make it the world’s most powerful supercomputer. The upgrade is expected to be installed by the end of this year.

“We’ve made tremendous progress on some of our new initiatives, expanding our product and service offerings to further solidify our leadership position in the industry,” Ungaro said in a statement. He added that Cray is delivering its supercomputing technology to a “broader set of customers,” and cited “over $70 million in new wins in just the last week.”

Cray has about 850 employees, 160 in the Seattle office. The company also has large facilities in Minnesota and Wisconsin, its original birthplace. (Cray Research was founded in 1972 by the renowned engineer Seymour Cray.) Its main competitors in supercomputing include IBM, Hewlett-Packard, Silicon Graphics, Hitachi, and NEC.

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