APPLICATIONS

Global supercomputer leader Cray Inc. today reported financial results for the third quarter ended September 30, 2003. Third quarter revenue was $63.8 million, up 52 percent from $42.1 million in the same period last year, reflecting strong customer acceptances during the quarter for the company's flagship Cray X1(TM) supercomputer system. Third quarter net income was $8.5 million or $.10 cents per diluted share, compared to $2.1 million or $.04 cents per diluted share for the same period in 2002. The company had strong operating cash flow of $24 million, with cash balances increasing to $69 million as of September 30, 2003. For the nine months ended September 30, 2003, total revenue increased to $169.7 million, up 46 percent from $115.9 million reported for the first nine months in 2002. Net income for the nine months was $17.5 million or $.23 cents per diluted share, compared to net income of $4.1 million and $.08 cents per diluted share respectively. "Excellent execution helped drive another profitable quarter, highlighted by record quarterly revenue of $63.8 million and strong gross margins of nearly 45 percent," commented Jim Rottsolk, Chairman and CEO of Cray Inc. "We anticipated a challenging third quarter because we were building and delivering larger Cray X1 systems for the first time, and therefore facing more difficult customer acceptances. Fortunately, we were successful on all fronts. Again, Cray employees deserve a great deal of credit for our accomplishments, as do our customers, who worked closely with us throughout the quarter." In October, the company announced Cray X1 supercomputer orders from The Boeing Company and the University of Warsaw. Earlier this week, Cray announced plans to expand the company's addressable market by offering a massively parallel processing (MPP) product based on the "Red Storm" supercomputer Cray is developing for Sandia National Laboratories. The new, high-bandwidth MPP product, using standard AMD Opteron(TM) microprocessors and the Linux operating system, is scheduled to begin shipping in 2004. "Our positive momentum has continued into the fourth quarter with important Cray X1 orders and exciting new product plans designed to help Cray penetrate new opportunities, both domestically and internationally," Rottsolk said. "The University of Warsaw order includes a planned upgrade to the Cray X1E and will be used to enhance weather forecasting, life sciences research and other research projects in Europe. The Boeing Company procurement was the first commercial sale of a Cray X1 system and will be installed in Boeing's Puget Sound Data Center," he said. Third Quarter Highlights -- Working closely with a number of our partners, we delivered several single-image systems of 128 processors or more, the largest of which is located at Oak Ridge National Laboratory. -- In July, Cray received additional funding of $50 million from DARPA for Phase II of an advanced research program (HPCS) to develop supercomputer technology capable of sustained petaflops performance by the year 2010. -- In August, Cray announced the appointment of Peter J. Ungaro as Vice President of Sales and Marketing. Ungaro was formerly vice president, worldwide deep computing sales at IBM. -- In September, Cray signed a co-funding agreement with the U.S. government under which the U.S. government will contribute $17.5 million toward the development of the successor of the Cray X1 and X1E supercomputer systems, code named "Black Widow." -- Also in September, industry analysts, International Data Corporation (IDC) reported that Cray captured first, second and third place in the most powerful class of single computers in their latest supercomputer rankings. Guidance "Based upon our solid results for the third quarter, we anticipate revenue for the full year 2003 will be between $230 million and $235 million. This assumes that systems scheduled for fourth quarter installation receive customer acceptance within the quarter," Rottsolk said. "Operating income should be slightly above the previously established range of five to ten percent of revenue."