going through a difficult restructuring. In the middle of 2005, Cray’s CEO (and Tera co-founder) Jim Rottsolk retired, and the board asked Ungaro to take on the role of president and then CEO.
Ungaro and his team made some bold moves in an effort to turn the company around. Cray went from just under 1,000 employees to about 750, while retaining most of its engineers. “We resized the company, except for R&D, so we could get more viable,” he says. “At that time, we really started to see a huge shift in the market toward multi-core technology. We saw it as a big thing, and a big place where we could differentiate. Instead of fighting the commodity [microprocessor] wave, we could use it to our advantage. That was a big bet we placed in 2005. Over half the company is R&D, incredibly brilliant engineers, and we wanted to use our traditional strengths.”
That meant focusing on using parallel-processing chips—those with multiple central processing units. Thanks to Moore’s Law, these chips have become quite powerful components for boosting the performance of supercomputers. To support this effort, Ungaro says, Cray invested in custom hardware and software to help pool the processing punch of thousands of machines, software to get as much performance as possible out of each machine, and packaging technology (including advanced liquid cooling systems), all in order to squeeze “more computing power into less space.”
It has taken a few years, but the strategy seems to be paying off. For starters, Ungaro says Cray has become debt-free as of this spring, after paying off $80 million in debt since October. “As the market went down, we started paying back the debt because we could get a great discount,” he says. “It’s a great sign for the company to pay off our debt early. It’s like paying off your home mortgage. It’s part of the growth of our company, becoming more financially stable.”
While paring back debt, Cray has been busy boosting its revenue—a whopping 52 percent increase in 2008 compared with the previous year. And the company’s revenue for the first quarter of 2009 was $74.5 million, compared with $26.1 million in the same period a year earlier. Yet Cray still hasn’t quite pulled itself out of the red, posting a net loss of $4.9 million for the first quarter of this year. So the firm still has a ways to go to get back on top against competitors like IBM (maker of the Roadrunner machine at Los Alamos), Hewlett-Packard (maker of Chinook at Pacific Northwest National Laboratory), Silicon Graphics, Fujitsu, Hitachi, and NEC. (Cray’s second quarter numbers for 2009 will be announced on Tuesday, Aug. 4.)
Nevertheless, the company has built itself back up to about 850 employees, 160 in the Seattle office, which employs a mix of engineers, finance, legal, and marketing people. (Ungaro adds that the Seattle office is hiring.) Cray’s biggest office—which includes employees in development, service, sales, marketing, and administration—is in Minneapolis-St. Paul, MN, and the firm still does all of its manufacturing in Chippewa Falls, WI.
Three business units are at the heart of Cray’s turnaround strategy. The first is “scalable systems,” its cash cow of high-end machines that cost $1 million and up. The second is what Ungaro calls “custom engineering.” This means taking individual supercomputing technologies—things like cooling systems, cabinets, and pieces of hardware or software—and selling them as professional services instead of delivering a complete supercomputer. And the third business unit is what he calls
