GOVERNMENT

Cray Inc. today announced a definitive agreement to acquire privately held OctigaBay Systems Corporation of Vancouver, British Columbia. OctigaBay is developing an innovative high performance computing (HPC) system designed to make supercomputing performance accessible to the growing community of scientific and technical computing users. This pending acquisition, coupled with Cray's previously announced decision to commercialize the "Red Storm" system, will extend Cray's product portfolio and multiply its addressable market by over four times. Cray will acquire OctigaBay in a transaction valued at approximately $115 million, based on Cray's closing price yesterday of $7.84. Cray will exchange about 12.7 million shares and just under $15 million dollars for all outstanding OctigaBay shares and will assume approximately 400,000 employee options. The transaction has been approved by the boards of both companies and is expected to close within 60 days of this announcement, subject to customary approvals. "Cray's success and leadership have been founded on delivering superior performance to solve our customers' most challenging computing problems," said Cray Chairman and CEO Jim Rottsolk. "OctigaBay's product is designed with the same philosophy, yet targeted at a different market segment. The combined company will increasingly benefit from the growing realization that purpose-built HPC systems like Cray's are more efficient and cost-effective than general business computers for the high performance computing market." "OctigaBay has developed ground-breaking technologies to bring unmatched price/performance, reliability and usability to high performance computing." said John Seminerio, president and CEO of OctigaBay. "Cray's proven market success, worldwide sales and service organization and global customer relationships will bring these technologies to more customers, in more markets, faster." Previewed in November 2003, the OctigaBay 12K high performance computer's innovative architecture embeds both a high speed interconnect and application accelerators to remove major bottlenecks, improving performance on real-world applications. Self-monitoring, self-healing and management features give administrators a highly reliable and easy-to-use system. Early shipments of the OctigaBay product are expected in the second half of 2004, with general availability in early 2005. Pricing, to be announced later this year, is expected to range from under $100,000 to about $2 million. The acquisition is expected to be accretive in 2005, excluding the impact of non-cash acquisition-related charges. For 2004, the continuing cost of OctigaBay's product development efforts and product launch will be about $2 million per quarter. "We have been working very closely with both Cray and OctigaBay. Their solutions provide differentiated, highly innovative, and high-bandwidth architectures that fully exploit the advanced capabilities of AMD64 technology, including best-in-class 32-bit performance, simultaneous 64-bit computing and HyperTransport technology," said Marty Seyer, vice president and general manager of AMD's Microprocessor Business Unit. "We look forward to working with the combined company as the 'Red Storm' and OctigaBay 12K projects near completion, and many other compute-intensive system wins are announced." According to Earl Joseph, IDC vice president of workstations and high-performance systems, "The Cray-OctigaBay merger unites a renowned industry leader that has been gaining market momentum with an innovative and intriguing new entrant in the HPC field. The combined company has the potential to extend Cray's custom high-bandwidth designs into the departmental and divisional market segments, by providing innovative higher-performance interconnect capability without the traditional high price tag. The combination of the two companies' product lines and the announcement in the fall of commercializing the Red Storm product allows Cray to address a market that is more than four fold its current addressable market."