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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 24, 2012 at 1:54 PM

Cray selling key technology to Intel

Seattle supercomputer maker Cray is selling a major part of its technology portfolio to Intel for $140 million, a move that will shift up to 74 Cray employees to Intel.

Cray’s selling its interconnect hardware assets and intellectual property. In addition to the cash, the company’s forming a new partnership with Intel, giving it “opportunities to leverage important differentiating features of certain future Intel products,” it said in a release.

The news was released after the stock market closed. In extended trading, Cray’s now up 24 percent to $8.75.

Cray’s research into superfast connections between computer hardware components has helped the company maintain its lead in the supercomputer business. It builds some of the world’s largest and fastest computers for governments, research centers, corporations and universities.

It’s not clear yet how the transfer of Cray’s interconnect technology will affect its ability to differentiate its systems in the future, but the company plans to share more details during a conference call Wednesday morning and during its quarterly earnings report Thursday.

Barry Bolding, Cray vice president of marketing, said the value of Cray’s interconnect assets was likely to decrease because chip makers are increasingly adding such technologies directly to their products. Cray was one of a few independent developers of interconnect technology left.

“What this gives us is the ability to sell at a very good value something that over time would lose value and take the assets – the cash they’re giving us – and utilize that to grow in areas that will maintain their differentiation,” he said. “From a business point of view, that’s a pretty strong play for a company like Cray that can’t afford to develop everything itself and has to be very selective about where it develops and differentiates.”

Bolding said Cray has other technologies that will help the company compete in four or five years, after it no longer has the advantage of its current, proprietary interconnect technology. They includes supercomputer software, technologies for handling “big data” sets and file system technologies.

Shifting the interconnect employees to Intel will lower Cray’s operating costs “with a relatively modest amount of the benefit expected in 2012,” its release said.

Cray now employs about 875 people, including around 100 at its headquarters in Seattle. The company wouldn’t say exactly where the 74 interconnect team members are located but there are large concentrations in Seattle and Chippewa Falls, Wisc.

It’s unclear yet where those employees will physically work after the deal closes. Cray and Intel are discussing options including letting them continue to work at Cray offices.

Comments | Topics: Cray

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