Silicon Graphics to sell off Cray

Computer maker Silicon Graphics is in talks to sell its Cray Research unit, better known for its range of supercomputers. SGI has been in talks with a little-known technology acquisition group called Gores Technology Group. The Cray machine was once talked of as one of the technological gems of the United States.

Gores was said to have originally offered $100 million for the struggling supercomputer maker but has lowered its offers since doing due diligence on Cray.

The California based SGI had announced in August that it had formed a separate business unit for Cray and that it was in active discussions with other companies to assume the operation of Cray through a partnership or another transaction.

Cray Research was founded in 1972 by supercomputing legend Seymour Cray, to develop the world's fastest general purpose supercomputers used for simulations of atomic explosions, weather forecasting, pharmaceutical design and other problems which require massive amounts of calculation.

SGI had bought over Cray three and a half years ago at a cost of over $700 million. Cray, once the largest maker of supercomputers, was making about $900 million in revenues and was the leading supercomputer company. Since then it has had problems partly due to a decline in U.S. research and defense budgets, one of its prime customers. Besides, the new and cheaper parallel systems were eating into its market share.

Some analysts feel that the merger proved disastrous for Cray since Cray and SGI had been competitors and were now partners.

Cray expects to have about 850 employees and $300 million in revenues, as a stand-alone company this year. It is also working on the successor to its current SV1 vector machine, called the SV2, which is due in mid 2002. The SV2 is a hybrid of Cray's vector technology with thousands of processors and has financial support and development assistance from the National Security Agency and other U.S. government agencies.