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Cray Inc. Reports Second Quarter 2010 Financial Results
Company Shipping New Supercomputer and Maintains Guidance for 2010 Revenue Growth and Profitability

SEATTLE, WA, Aug 05, 2010 (MARKETWIRE via COMTEX) --

Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced financial results for the second quarter ended June 30, 2010. Revenue for the quarter was $28.7 million compared to $62.7 million in the prior year period. The company reported a net loss for the quarter of ($6.6 million) or ($0.19) per share compared to net income of $3.4 million or $0.10 per share in the second quarter of 2009.

Total gross profit margin for the second quarter was 39 percent, compared to 45 percent in the second quarter of 2009. Product margin in the second quarter of 2010 was 50 percent, which was unusually high on low volume. The second quarter 2010 service margin of 34 percent was negatively impacted by a delayed custom engineering contract.

Operating expenses in the second quarter of 2010 declined to $17.6 million compared to $24.0 million in the prior year period. The reduction was primarily driven by lower spending on outside services in research and development (R&D) and the completion of a Defense Advanced Research Projects Agency (DARPA) contract milestone in the second quarter of 2010. The second quarter 2010 results included non-cash items of $2.3 million for depreciation and amortization and $1.3 million related to stock compensation expense.

Driven by the recent introduction of the Cray XE6 supercomputer and consistent with expectations for revenue concentration late in the year, revenue for the six-month period ending June 30, 2010 was $57.1 million compared with $137.2 million in the prior year period. For the first half of the year, total operating expenses were $35.9 million compared to $45.4 million in the prior year period. Net loss was ($18.2 million) or ($0.53) per share for the first half of 2010 compared to a net loss of ($1.5 million) or ($0.04) per share in the prior year period. The first half of 2010 results included non-cash items of $4.5 million for depreciation and amortization and $2.5 million related to stock compensation expense.

As of June 30, 2010, cash balances totaled $85.3 million.

"I remain very excited about our 2010 prospects, led by a number of significant wins and continued strength in custom engineering," said Peter Ungaro, president and CEO of Cray. "We also just achieved a major milestone as we are now shipping our groundbreaking Cray XE6 supercomputers, many to new customers, and are in the midst of one of the largest production ramps in our history. In fact, in a five month period this year, we expect to ship over six-times more compute power than we did in all of 2009, demonstrating our strong competitive position and the advantage of Cray's tightly-integrated architecture. While we still have a lot of work left to do, I'm confident we are on track to deliver a strong year."

Outlook

A wide range of results remains possible for 2010. Many variables may impact our results, but one significant item is the timing of customer acceptances of our supercomputers.

Assuming successful Cray XE6 customer acceptances in 2010 as currently planned, we continue to anticipate revenue in the range of $305 to $325 million for 2010, with the vast majority being recognized in the fourth quarter. Gross margins for 2010 are expected to be in the low to mid-30 percent range. Operating expenses are expected to be lower in 2010 than in 2009, driven primarily by lower outside services and higher anticipated R&D co-funding credits. Based on this outlook, we expect to be profitable for 2010.

We expect to use cash in 2010, with a decline in the third quarter as inventory continues to build to support the Cray XE6 product release.

For 2011, Cray expects its revenue to continue to grow and to be profitable, although actual results for any future period are subject to large fluctuations given the nature of Cray's business.

Recent Highlights

-- In July, Cray announced it had begun shipping multi-cabinet Cray XE6
   supercomputers to customers.  Launched in May 2010, the new system
   combines the company's new Gemini system interconnect with powerful AMD
   Opteron processors and is designed to bring production petascale
   computing to a new and expanded base of high performance computing
   users.  The Cray XE6 supercomputer features system enhancements such as
   an improved network performance and resiliency, a mature and scalable
   software environment, and the ability to run a broad array of
   independent software vendor applications with the third version of our
   Cray Linux Environment.
-- In June, Cray completed a development milestone related to its DARPA
   contract.  The $12.0 million milestone represented an offset to gross
   R&D expense in the second quarter.
-- In June, Cray announced that Sweden's Royal Institute of Technology had
   ordered a Cray XT6m supercomputer.  The new system will support
   scientists in a wide range of disciplines, including computational
   chemistry, bioinformatics, molecular dynamics, computational fluid
   dynamics and other areas.
-- In May, Cray announced it had received a contract from the U.S.
   Department of Energy to provide the National Oceanic and Atmospheric
   Administration and the Oak Ridge National Laboratory with a
   next-generation Cray supercomputer.  Once completed, this system will be
   the world's most powerful supercomputer dedicated to climate research.
   Consisting of products and services, the multi-year, multi-phase
   contract is valued at $47 million.
-- Cray signed a number of custom engineering contracts in the second
   quarter, including research in areas addressing future system
   technologies and system resiliency as well as contracts for data
   management solutions.

Conference Call Information

Cray will host a conference call today, Thursday, August 5, 2010 at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss 2010 second quarter financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at 1-800-762-9441. International callers should dial 1-480-629-9675. To listen to the live audio webcast, go to the Investors section of the Cray website at http://investors.cray.com.

If you are unable to attend the live conference call, an audio webcast replay will be available in the Investors section of the Cray website for 180 days. If you do not have Internet access, a replay of the call will be available by dialing 1-800-406-7325, international callers dial 1-303-590-3030, and entering the access code 4340268. The conference call replay will be available for 72 hours, beginning at 4:30 p.m. PDT on Thursday, August 5, 2010.

About Cray Inc.

As a global leader in supercomputing, Cray provides highly advanced supercomputers and world-class services and support to government, industry and academia. Cray technology is designed to enable scientists and engineers to achieve remarkable breakthroughs by accelerating performance, improving efficiency and extending the capabilities of their most demanding applications. Cray's Adaptive Supercomputing vision is focused on delivering innovative next-generation products that integrate diverse processing technologies into a unified architecture, allowing customers to surpass today's limitations and meeting the market's continued demand for realized performance. Go to www.cray.com for more information.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, but not limited to, statements related to Cray's financial guidance and expected future operating results and its product development plans, including our ability to deliver additional Cray XE6 systems over the coming months and obtain revenue and cash from these and other Cray XE6 and Cray XT6 sales. These statements involve current expectations, forecasts of future events and other statements that are not historical facts. Inaccurate assumptions as well as known and unknown risks and uncertainties can affect the accuracy of forward-looking statements and cause actual results to differ materially from those anticipated by these forward-looking statements. Factors that could affect actual future events or results include, but are not limited to, the risk that Cray does not achieve the operational or financial results that it expects, the risk that customer acceptances on Cray XE6 or Cray XT6 systems are not received when expected or at all, the risk that Cray XE6 or Cray XT6 systems do not perform as expected or as required by customers, the risk that we are unable to successfully manufacture what for us would be an extremely large number of system cabinets in a relatively short period of time, the risk that the Company is not able to adequately resolve or mitigate potential Cray XE6 or Cray XT6 product issues known now or that are discovered later, the risk that Cray is not able to achieve and obtain acceptance of co-funded development milestones when or as expected or at all, the risk that Cray will not be successful in growing revenue from its strategic initiatives, particularly custom engineering and such other risks as identified in the Company's quarterly report on Form 10-Q for the period ended March 31, 2010, and from time to time in other reports filed by Cray with the U.S. Securities and Exchange Commission. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. Cray undertakes no duty to publicly announce or report revisions to these statements as new information becomes available that may change the Company's expectations.

Cray is a registered trademark of Cray Inc. in the United States and other countries and Cray XE6, Cray XT6T, Cray XT6m, and Cray Linux Environment are trademarks of Cray Inc. Other product and service names mentioned herein are the trademarks of their respective owners.

                        CRAY INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited and in thousands, except per share data)
                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
REVENUE:
  Product                       $   9,253  $  42,101  $  18,318  $ 101,563
  Service                          19,480     20,643     38,803     35,662
                                ---------  ---------  ---------  ---------
     Total revenue                 28,733     62,744     57,121    137,225
                                ---------  ---------  ---------  ---------
COST OF REVENUE:
  Cost of product revenue           4,587     22,263     12,593     68,597
  Cost of service revenue          12,828     11,952     26,576     22,228
                                ---------  ---------  ---------  ---------
     Total cost of revenue         17,415     34,215     39,169     90,825
                                ---------  ---------  ---------  ---------
     Gross profit                  11,318     28,529     17,952     46,400
                                ---------  ---------  ---------  ---------
OPERATING EXPENSES:
  Research and development, net     7,044     13,710     14,738     24,925
  Sales and marketing               6,572      6,341     12,836     12,404
  General and administrative        4,018      3,901      8,305      8,047
                                ---------  ---------  ---------  ---------
    Total operating expenses       17,634     23,952     35,879     45,376
                                ---------  ---------  ---------  ---------
    Income (loss) from
     operations                    (6,316)     4,577    (17,927)     1,024
Other income (expense), net          (148)      (737)       (51)    (1,491)
Interest income (expense), net         22       (351)        39       (884)
                                ---------  ---------  ---------  ---------
    Income (loss) before income
     taxes                         (6,442)     3,489    (17,939)    (1,351)
Income tax expense                   (196)       (69)      (296)      (117)
                                ---------  ---------  ---------  ---------
    Net income (loss)           $  (6,638) $   3,420  $ (18,235) $  (1,468)
                                =========  =========  =========  =========
   Diluted net income (loss)
    per common share            $   (0.19) $    0.10  $   (0.53) $   (0.04)
                                =========  =========  =========  =========
   Diluted weighted average
    shares outstanding             34,246     33,965     34,101     33,390
                                =========  =========  =========  =========
                        CRAY INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                       (Unaudited and in thousands)
                                                  June 30,    December 31,
                                                    2010          2009
                                                ------------  ------------
                      ASSETS
Current assets:
   Cash and cash equivalents                    $     80,039  $    105,018
   Restricted cash                                     5,212         5,161
   Short term investments, available-for-sale              -         2,999
   Accounts and other receivables, net                37,695        38,207
   Inventory                                         110,554        29,011
   Prepaid expenses and other current assets           9,327         5,514
                                                ------------  ------------
      Total current assets                           242,827       185,910
Property and equipment, net                           20,856        19,809
Service inventory, net                                 1,529         1,719
Deferred tax assets                                    2,684         2,661
Other non-current assets                              12,707        13,561
                                                ------------  ------------
      TOTAL ASSETS                              $    280,603  $    223,660
                                                ============  ============
      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                             $     64,870  $     18,783
   Accrued payroll and related expenses               11,995        16,219
   Other accrued liabilities                           5,963         9,735
   Deferred revenue                                   75,915        42,414
                                                ------------  ------------
      Total current liabilities                      158,743        87,151
Long-term deferred revenue                             8,406         9,627
Other non-current liabilities                          2,413         2,719
                                                ------------  ------------
      TOTAL LIABILITIES                              169,562        99,497
Shareholders' equity:
   Common stock and additional paid-in capital       555,511       551,220
   Accumulated other comprehensive income              6,970         6,148
   Accumulated deficit                              (451,440)     (433,205)
                                                ------------  ------------
      TOTAL SHAREHOLDERS' EQUITY                     111,041       124,163
                                                ------------  ------------
      TOTAL LIABILITIES AND SHAREHOLDERS'
       EQUITY                                   $    280,603  $    223,660
                                                ============  ============

Cray Media:
Nick Davis
206/701-2123
pr@cray.com

Investors:
Paul Hiemstra
206/701-2044
ir@cray.com


SOURCE: Cray Inc.

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