Supercomputing Still Rules The Advanced World (CRAY, GE, IBM, SGI, ORCL)

When it comes to the world of supercomputing, there is no other pure-play like Cray Inc. (NASDAQ: CRAY).  It is also perhaps one of the forgotten companies of yesteryear by investors as desktop PCs and servers have become more powerful than most consumers will ever need.  Many think that International Business Machines Corp. (NYSE: IBM) is best in class, but others like Fujitsu are also competing and there is still the Silicon Graphics International Corporation (NASDAQ: SGI) with its Altix supercomputer system.

When it comes to enterprises from government agencies to large corporations, the world of supercomputers is safe.  Supercomputer orders do not get announced every day, nor every week, so when these orders are announced it often makes the news.

Cray Inc. (NASDAQ: CRAY) did announce an order from General Electric Co. (NYSE: GE), but before we head into that we want to consider one potential issue down the road.  Oracle Corporation (NASDAQ: ORCL) has a long history of making acquisitions that will assist it in winning enterprise business.  By acquiring Sun Microsystems, Larry Ellison effectively inherited a supercomputing platform that had gone under the names TSUBAME and Ranger.  Recent news about supercomputers and Sun Microsystems in the same sentence has gone dry for the most part.  Last year the Red Sky Supercomputer was featured at Sandia National Labs in New Mexico, but investors still generally think of Oracle for enterprise software suites.

Back to Cray and GE… Cray has freshly announced that it has sold a Cray XE6m supercomputer to GE Global Research, the technology development arm for the General Electric Company (NYSE: GE). The new Cray supercomputer will be used to support simulation-based engineering and science across various disciplines at GE Global Research. The Cray system will give GE Global Research the ability to run forward-generation simulations in science and product development.

Industry observers see high performance computing resources supporting increasingly sophisticated computational simulations and modeling.  These here-to-fore unobtainable simulations and experiments that will enable corporate giants like GE to take product development to higher levels. The sale of a Cray XE6m system to GE Global Research marks another significant step in Cray’s return to the manufacturing segment.

Cray has also announced pacts this year with industrial research and scientific centers such as GE Global Reasearch; Swiss National Supercomputing Centre; Center for Applied High Performance Computing (Danville, VA); the University of Edinburgh; and the Partnership for Advanced Computing in Europe.

Cray shares are up nearly 4% at $6.32 and its 52-week trading range is $4.95 to $8.38. The current market cap is almost $220 million and its shares have not surpassed $10.00 since back before the recession.

There are many organizations which use storage farms and which daisy-chain computing power to get around having to have formal supercomputers.  That is unfortunately a cost issue against and efficiency issue.  It is also far from being as efficient in most cases.  That also brings up the old memories of Skynet from the Terminator series.

Ordering a supercomputer is not something that an enterprise goes to their local electronics store to order.  These are generally giant systems in size and computing and the orders generally tend to run into the millions of dollars per system.  When news occurs in supercomputer orders, it tends to linger for some time.

JON C. OGG