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Cray Inc. (CRAY)

Q1 2008 Earnings Call Transcript

April 29, 2008 4:30 pm ET

Executives

John Snyder – IR, Snyder Investor Relations

Peter Ungaro – President and CEO

Brian Henry – EVP and CFO

Analysts

Chad Bennett – Northland Securities

Doug Reid – Thomas Weisel Partners

Sid Parakh – McAdams Wright Ragen

Vic Kumar [ph] – Soundpost Partners

Presentation

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Cray reports first quarter 2008 financial results conference call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator instructions) This conference is being recorded Tuesday, April 29, 2008. I would now like to turn the conference to John Snyder. Please go ahead, sir.

John Snyder

Good afternoon and thank you for joining us today. Participating from Cray are Peter Ungaro, President and Chief Executive Officer; Brian Henry, Executive Vice President and Chief Financial Officer; and Ken Johnson, Senior Vice President and General Counsel. This call is being broadcast live on the Internet and recorded for replay purposes. A replay will be available shortly after the call, and you can access the replay by dialing 1-800-405-2236. International callers can dial 303-590-3000. You must then enter the access code 11113355. A replay will also be also available in the Investor Relations section of the Cray web site for 180 days at cray.com.

During the course of this call, management will make projections or other forward-looking statements regarding potential future events or the financial performance of the company. I want to caution you that the statements are current expectations, and actual events or results may differ materially. Please refer to the documents which the company files from time to time with the Securities and Exchange Commission. They contain and identify important risk factors that could cause the actual results to differ materially from those contained in the projections or forward-looking statements.

With that, I would like to turn the call over to Peter Ungaro.

Peter Ungaro

Thanks, John, and welcome to everyone joining us on the call today. I would like to start with some comments around our first quarter results and progress towards key focus areas for the year. Brian Henry will then discuss first quarter financial results along with our outlook for 2008. And following Brian's comments, I will discuss our priorities going forward, and spend a few minutes on the announcement we made yesterday. We will then open the call up for Q&A.

Our goals for 2008 are to be profitable and grow. Now while progress isn’t clearly evident in our first quarter financial results, I will say that we made great progress this year towards positioning ourselves to achieve these goals. First, we’ve announced a number of great wins this year. These wins include four of the five high performance computing systems awards by the Department of Defense as part of its 2008 HPC Modernization Program. This award calls for delivery of four Cray XT5 systems to be located at top military research centers, including the Army Research Laboratory, the Naval Oceanographic Office, and the Arctic Region Supercomputing Center.

Other wins this year include an upgrade to the Sandia Red Storm system, doubling the performance of that system from 124 to 248 teraflops. The Red Storm upgrade will allow researchers and scientists to run even higher resolution models and increase the accuracy of critical computer simulations.

Another big win was with the University of Tennessee for a system which will reach almost a petaflop level of performance. This system was awarded by the National Science Foundation as part of their High Performance Computing Initiative. It will be used to advance science across a number of scientific disciplines, including global climate change research, natural disaster modeling, and understanding the complexity of the human brain. Without a doubt, these wins are clearly a tremendous start on the sales front for 2008.

On the product development and introduction front, though we have not yet recognized initial revenue on quad-core XT4 systems, we delivered initial quad-core systems in the first quarter and are starting system acceptances as we speak.

We also achieved acceptance of our first Cray XT5h vector system a couple months ahead of schedule. Clearly, execution on our product roadmap has been a priority, so we are pleased with these important milestones.

The next step, of course, will be to begin acceptances of quad-core systems, followed shortly by deliveries and acceptances of Cray XT5 MPP systems, which are due to begin shipping later this year.

Additionally, we announced yesterday a partnership with Intel that will bring together Cray's industry leadership in supercomputing systems with Intel's leadership in processing technologies. In a moment I will talk more about the opportunity we see here, but needless to say we are very excited.

Finally, we are planning to deliver our first petaflop supercomputer to Oak Ridge National Laboratory late this year. And that, combined with our other wins that I just mentioned, we now have sufficient visibility to achieve our 2008 growth objective. This is a great position to be in this early in the year. I know that Brian will mention a little more about this in our outlook. The timing of the Oak Ridge delivery has been targeted for late 2008 or early 2009, and over the course of the last three to six months we have made tremendous progress on the development front and firmed up a plan to achieve the Department of Energy's goal of installing this system this year. We and the folks at Oak Ridge are very excited about this system and we have a tremendous effort underway to see this happen, which, given the sheer size of this system, is no slam dunk.

Read the rest of this transcript for free on seekingalpha.com