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Cray announces Q3, posts loss

Cray Inc. just posted news of its third quarter financial performance

Cray logoCray Inc. (NASDAQ: CRAY) today announced financial results for the third quarter ended September 30, 2009. Revenue for the quarter was $58.6 million compared to $54.6 million in the prior year period, an increase of 7 percent. The company reported a net loss for the quarter of ($2.1 million) or ($0.06) per share compared to net income of $3.6 million or $0.11 per share in the third quarter of 2008.

As we’ve noted before, Cray is the only company that focuses primarily on the high end, so it’s revenues are quite lumpy, and profitability can be driven by a single deal slipping from one quarter to the next. The company had been cleaning up its house by cutting costs and growing margins, which in previous quarters had helped the finances quite a bit. This quarter saw a retraction in product margin (a function of a one-time buy) and a growth in operating expenses that the company also claims is a one-time event

Total gross profit margin for the third quarter of 2009 was 39 percent compared to 51 percent in the third quarter of 2008. Product margin for the third quarter of 2009 was 23 percent and was negatively impacted by a $4.5 million write down (a 14 percent product margin impact) for inventory purchased in 2008 as part of a last-time buy. Service margin was 59 percent in the third quarter of 2009 and benefited from the execution of a contract that allowed us to recognize approximately $3.9 million of revenue for work performed in the prior quarter.

Operating expenses for the third quarter were $27.1 million compared to $22.3 million in the prior year period. As previously anticipated, third quarter 2009 operating expenses increased due to a delayed milestone on a co-funded development contract.

Looking at the nine months just ended and comparing them to the same nine months in 2008, Cray’s revenue is way up ($196M vs. $127M), and losses are down (-$3.6M vs. $14.8M). This is good, but a  turn down from the six month year-over-year comparison, which had Cray 88% ahead of last year at the end of Q2. The company has reasonable cash on hand of about $68M.

Projected revenues for all of 2009 have been revised slightly down since the Q2 announcement, by $5M to $285M, and Cray has dropped its hopeful statement that it would achieve operating profitability for 2009.

If you want to tune in and learn more, Cray is hosting its earnings call today

Cray will host a conference call today, Thursday, October 29 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss 2009 third quarter financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at 1-877-941-1465. International callers should dial 1-480-629-9678. To listen to the live audio webcast, go to the Investors section of the Cray website at http://investors.cray.com.

Comments

  1. Yes they are in the high end but why make excuses for the fact that they can’t make money – maybe greater diversification is needed or their business model is flawed. Almost every quarter there is some write down, order/product delay, higher cost followed by the CFO saying if we didn’t have these we would have been profitable. Last night I missed the lottery by one number therefore I should consider myself a millionaire. Be honest, the business model is flawed and a net loss for 2009 will happen followed by some words of wisdom around, “we have this one time fill in the blank excuse but we would have made money”.

    If Dell, SGI and HP have a hard time growing why should anyone have faith that Pete can deliver a profitable company that can grow?

  2. John West says:

    Dell and HP are a different kind of company, and the comparison isn’t warranted. They both sell technology, but Cray only sells one kind of technology while the other companies have a very diversified portfolio and make (or lose) money for reasons largely unrelated to HPC.

    Your bigger question — is a business model that focuses solely on the high end of HPC flawed — is an interesting (if not new) one. The technology is clearly required as an engine of innovation, not only in economic terms but in areas where we want to lead the world nationally (nuclear stockpile, weapons development, etc.). We also require aircraft carriers, and there is no business model for those: the industry is sustained solely by governments around the world for reasons other than economic efficacy.

    Back to the question of Cray and whether they can consistently make money (because they have been profitable in various quarters in the recent past), I think they can. The company has been doing a lot of rebuilding, and is in a sound financial position now with little outstanding debt and excellent management. But it would make for an interesting article to talk with pure play HPC CEOs and get their take on their own business.

  3. Agreed, we need aircraft carriers but let’s face it these companies make other products/technology and make money because their business is diversified.

    While they may have had a good quarter nothing has been sustained they just booked in one quarter at the expense of the other. Looking at the past financials Cray lost money in ’06, ’07 and ’08 so I fail to see the logic that it will get better on a consistent basis.

    Is the government paying too much for the technology and do we really need the Cray’s and SGI’s of the world? Can our wallets take this?? Maybe we should have a Tech Czar and regulate the CEO pay!

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  1. [...] the end of October Cray announced financial results for their fiscal third quarter, ended Sep 30. Revenue was up, but the company reported a loss for [...]

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