The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (Magic Diligence) -- When you say the word "super-computer," one name comes to mind: Cray (CRAY). The firm is synonymous with high performance computing. Founded in the early 1970s by Seymour Cray, the company's first computer, the Cray-1, was renowned as the world's fastest computer, achieving fame during the Cold War when the first unit was installed at Los Alamos during the height of nuclear proliferation.
The firm has been through quite a few changes since those days. After merging with Silicon Graphics in the late 1990s, SGI then sold it to Tera Computer in 2000, after which Tera changed its name to Cray and operates as the stock we review here.
Cray still is focused on the super-computer market, specifically the top-of-the line units usually costing more than $500,000. Super-computers are used by governments, academic institutions, and some commercial entities for solving the worlds' most complex problems. The key market segments are in scientific research (National Science Foundation, NASA), national security (Department of Defense, Department of Energy), earth sciences (for weather and climate modeling), and in computer-aided design (especially for aeronautics and automobile design).Super-computers require special design in both hardware and software to ensure parallel processing with a minimum of data bottlenecks in interconnection. The density and compute power of these systems is pretty amazing. Cray's XE6 can support 192 AMD (AMD) 8 or 12-core Opteron processors, with a total computer power of 20 trillion floating point operations per second! Super-computing is a growing market. IDC estimates the addressable market in 2009 at about $3.4 billion, and sees it growing about 6.5% per year through 2014. Evolving scientific areas, such as bio-engineering, nanotechnology, clean energy technologies, climate modeling (think global warming), and terrorism prevention all depend on super-computing assets. Cray is also pushing its Custom Engineering services, where the firm utilizes its significant know-how to develop specialized high performance platforms for discrete tasks. The company has seen solid revenue growth over the past 5 years (about 11% annualized), and I don't think revenue growth will be a huge problem here.
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