Supercomputermaker Cray narrowly missed its projected revenue targets for the second quarter, but is revving up to bring home the bacon in the second half of the year as it delivers its new XT6 and XE6 massively parallel supers.
In the quarter ended in June, product revenues plummeted by 78 per cent to $9.3m as customers waited for the XT6 machines, which are based on the twelve-core "Magny-Cours" Opteron 6100 processors from AMD, and the XE6 machines, which pair the XT6 blades with a new XE interconnect (formerly known as "Gemini") that allows Cray to scale a system up to more than 1 million cores with 100 times the message bandwidth between nodes and one quarter of the latency for a hop.
Services revenues at Cray in Q2 came to $19.5m, down 5.6 per cent. Total revenues for the quarter came to $28.7m, down 54.2 per cent. Cray had been expecting revenues to be around $30m in the second quarter, and has been forecasting revenues of around $50m for the third quarter.
Net income for the quarter was cushioned by the US Defense Advanced Research Projects Agency's passing of another milestone for the "Cascades" supercomputer development effort, which kicked in $12m to offset R&D expenses. (This $12m is not booked as revenue, just like the $12m in the milestone for the contract that was passed in Q1 was not.) Despite that cushion from Uncle Sam, Cray nonetheless lost $6.6m.
Despite the shortfall in Q2, Peter Ungaro, Cray's president and chief executive officer, was downright chipper on the call with Wall Street analysts — that's because four of the biggest supercomputers in the world are going out the door before October and two have already been delivered.
Cray is not saying who has what yet, or bragging about petaflops, but Ungaro said with a laugh that the six machines were "quite large," adding that one XT6 box has shipped already, one is being staged for delivering now, and another is being manufactured. The first multi-cabinet XE6 machine has been delivered and one more is being built now, with another due before Cray reports its Q3 results in October. Cray will ship an XT6 or XE6 machine "nearly every week" between now and October, including small systems and upgrades from prior machines.
In a statement accompanying the financial results, Ungaro said that according to the current build-and-delivery schedule, in the five months running from June through October Cray will ship six times the floating point number-crunching capacity to customers than it did in all of 2009.
That's a lot of flops.
And it will be a lot of money, too, if Cray hits its revenue goals of $305m to $325m, which it reaffirmed in the call today. That means Cray has to book around $200m in revenues in the fourth quarter of this year at the midpoint of that guidance. Cray only books revenues once the supers have been accepted after running their test codes, not when the machines are delivered. (Unlike general-purpose server makers, which book on shipment, not delivery and not upon acceptance. The assumption is that you will be happy when you get it.) So people really have to be happy with the XT6 and XE6 machines before Cray spends the dough.
Assuming that there's the normal $20m or so of services revenues in the third quarter, and given that Brian Henry, Cray's chief financial officer, said that the company is on track to book $110m in custom engineering and maintenance services revenues in the quarter, that means there is about $50m or so in the fourth quarter that has to come from services. Now assume there's some hardware and software in that custom engineering number (Henry said there was), maybe shave it down to $45m for services on the books proper in Q4, and that leaves something like $155m in hardware revenues in Q4.
In stark contrast, Cray had only $137.2m in total revenues and only $101.6m in product revenues in all of 2009.
Cray thinks it can hit its revenue targets for the fourth quarter and get Cray to profitability for the year. And not only that, Ungaro and Henry said in the call that Cray would be able to boost revenues and profits over these levels in 2011, with two expected upgrades to the XE6 machine coming in the second half of next year. As was the case in 2010, Cray expects its revenues to be heavily weighted to the second half of 2011 because of product transitions.
Neither Cray executive elaborated on what those enhancements might be, but one of them almost certainly is an upgrade to AMD's 16-core "Interlagos" Opteron processor. The other is very likely to be a Gemini+ tweak to the new XE interconnect at the heart of the XE6 system. ®