SEATTLE Oct 20 "Big data" means big computers,
and good news for Cray Inc
The pioneer of supercomputers in the 1970s stood on the
brink of obscurity 20 years ago but is now surging back to
prominence. Its shares have almost doubled over the past 12
The explosion of data - measuring weather, traffic, health
and countless other areas - coupled with a desire to tease
meaning out of it, demands greater computing power than is
accessible via standard machines.
"The assumption was that supercomputers were cliche five
years ago. People thought, 'I can run my simulation on my
laptop'," said Barry Bolding, a Cray vice president, at the
company's Seattle headquarters last week. "That may have been
true, so long as the data associated wasn't growing as well. But
raw data is being created in exabytes as we sit here. More data
means bigger computer, bigger computer means more data."
Experts estimate that 2.5 exabytes - or 2.5 billion
gigabytes - of data are now generated every day, and the world's
capacity to store that data is doubling every 40 months, which
all plays to Cray's strengths.
A basic Cray cabinet costs $500,000 and up and is roughly
the size of a refrigerator. Big customers can group 200 or more
into massive supercomputers worth hundreds of millions of
dollars, such as "Titan" at the U.S. Department of Energy's Oak
Ridge National Laboratory.
Titan, completed by Cray last year, is the world's
third-fastest supercomputer, takes up the size of a basketball
court and can perform more than 20,000 trillion calculations a
To be sure, most companies will never need that scale, or
can process what they need through multiple machines running in
tandem on a high-speed network or in the cloud, which for many
projects works out cheaper and more power-efficient.
What makes supercomputers different is that they can make a
huge number of interconnected calculations at the same time,
rather than a consecutive list of unconnected calculations,
which makes them good for running complex simulations and mining
For example, weather apps on smartphones are based on vast
models run by research agencies on supercomputers. Financial
firms can detect online fraud or cybersecurity breaches in
seconds rather than days by using supercomputer models, which
would take days on standard set-ups.
"Big data is a new term, but arguably the supercomputer
market was the original home of big data, and Cray has been
dealing with it forever," said Steve Conway, an analyst at tech
research firm IDC.
MARKET ON FIRE
The Seattle-based company, with just over 900 employees and
a market value of around $940 million, has changed ownership
several times but was started in 1972 by Seymour Cray, the
"father of supercomputing."
With a recent resurgence in supercomputers, Cray is
garnering Wall Street's attention. This June, it sold one of its
new XC30 supercomputers to the European Centre for Medium-Range
Weather Forecasts for $65 million, nabbing a contract from a
long-time IBM customer.
That sort of deal is piquing investor interest. Wall Street
analysts are expecting revenue of $519 million this year, up 23
percent from 2012, with a gross profit margin around 34 percent.
Its shares are up 91 percent over the past 12 months while rival
Silicon Graphics International Corp's are up 90 percent.
Cray is now richly valued, with a share price 36 times estimated
earnings for the next 12 months, compared with 19 times for SGI.
The global market for computers costing more than $500,000
is on a tear, according to IDC, having more than doubled to $5.6
billion in 2012 from $2.7 billion in 2008.
The whole market for high-performance computing (HPC) -
essentially any machine bigger than a desktop used for intense
computation - is forecast to grow 7 percent a year through 2017,
well ahead of the stagnant business server market.
The U.S. government directly or indirectly accounted for
two-thirds of Cray's revenue last year. But the company is
reaching out to new customers interested in big data. Last year
it set up a new unit called YarcData - Yarc is Cray backwards -
to focus on analyzing huge amounts of information and teasing
out unseen patterns in a process known as graph analytics.
"Unstructured databases are becoming more prevalent,
gathering raw data from everywhere," said Cray's Bolding. "Now
you start asking very complex questions, and it starts to create
links between sets of data."
The YarcData unit is helping the U.S. government detect
fraud patterns in Medicare and Medicaid payments. Private sector
customers include medical research group Mayo Clinic and several
financial services, life sciences and telecommunications firms,
which Cray cannot name for contractual reasons.
New efforts are working and should boost revenue over time,
said Sid Parakh, an analyst at fund firm McAdams Wright Ragen.
"This is not a commodity market. It takes years of
experience," said Conway at IDC. "It's easy to build a big
computer, but it's not easy to build a big computer that works."