APPLICATIONS

SEATTLE, WA – Supercomputer provider Cray Inc. (Nasdaq:CRAY) today announced financial results for the second quarter ended June 30, 2002. Revenues for the quarter totaled $38.6 million, a 31 percent increase over $29.4 million reported in the same quarter last year. Net income for the second quarter was $1.2 million, with fully diluted earnings per share of $.02 cents, compared to a loss of $9.9 million, or ($.24) cents per share, for the second quarter last year. The company reported gross margin for the quarter of 43 percent. The backlog was approximately $35 million as of June 30, 2002, and is expected to grow to $100 million by year-end. Year-to-date, the company reported revenues of $73.8 million, compared to $78.2 million in the first six months of 2001. Net earnings for the six months were $1.9 million, or $.04 cents per share, compared to a loss of $7.1 million, or ($.18) cents per share, in the same period last year. Year-to-date results include a one-time restructuring charge of $1.9 million recorded in the first quarter, 2002. In June, Cray received net proceeds of $8.9 million, after expenses, from exercises of stock purchase warrants. Holders exercised warrants covering an aggregate of 2,389,890 shares, and warrants for the remaining 2,497,295 shares expired on June 21, 2002. Including proceeds from the warrants, Cray's cash position was approximately $16.7 million as of June 30. Receivables were $30 million at the end of the second quarter. "Our second quarter was exceedingly productive," commented Jim Rottsolk, Cray chairman and CEO. "We posted another profitable quarter, improved our working capital position and made a series of important announcements throughout the quarter. "We remain positive about the outlook for the upcoming third and fourth quarters and anticipate profitability and positive cash flow for the full year, with revenues in the range of $150 to $160 million," he said. Rottsolk added that the company continues to execute well in all aspects of product development and announced that the "Cray SV2" (project code name) for the company's next-generation supercomputer line has now been replaced with an official product name: the Cray X1(TM) series. "The 'X1' designation stands for the first generation of our planned multi-generational series of 'extreme performance' supercomputer systems," he said. "The Cray X1 series is the unified successor to our Cray T3E(TM) and Cray SV1ex(TM) products. "We expect the Cray X1 series to be the world's most powerful supercomputer product. It is also an important milestone en route to our goal of delivering the first sustained petaflop product," Rottsolk said. A petaflop is a computing speed of one thousand trillion (million billion) calculations per second. A computer able to calculate at a sustained (actual) speed of one petaflop would need to have a peak (theoretical) speed of multiple petaflops. First shipments of the Cray X1 system are on target to deliver in the fourth quarter of 2002. Recent Highlights The company received $19 million in orders from defense agencies for its new Cray X1 supercomputer. Cray installed an SX-6 system at the Artic Region Super Computing Center, the first customer installation of an SX-6 in the United States under an OEM agreement completed last year between Cray and NEC. Cray sold a Cray SX-6 supercomputer to a Canadian industrial company. Cray was the sole contractor selected by Sandia National Laboratories to negotiate a multi-year contract worth approximately $90 million. Cray was awarded $10 million in co-development funds from the U.S. Government to assist in the development of the next generation of supercomputer technologies. Cray signed a $3.6 million agreement with Defense Advanced Research Projects Agency (DARPA) to provide the Department of Defense with technology advancements for national security. Cray was selected to join the Russell 3000 Index. "The accomplishments this quarter are many and we are in a solid position to win new commercial and government contracts. We're now at a point where strategy combined with consistent execution is beginning to deliver positive results," Rottsolk said. "Equally important, with the co-development funds from the government and other milestones achieved recently, we've been able to firmly establish our strategic direction and product plans through to the end of the decade."