The Problem Even A Cray 3 Couldn't Solve

Is the curtain about to fall on supercomputer genius Seymour R. Cray? In December, Lawrence Livermore National Laboratory, tired of delays, canceled Cray Computer Corp.'s one and only order for a Cray 3 supercomputer. Then, on Apr. 16, Neil Davenport, the company's president and chief executive, up and quit. With no sales, no orders on hand, no working prototype, and no CEO, Cray Computer's short run looks as if it's about finished.

"This is the death rattle," says one major supercomputer buyer, reacting to Davenport's departure. Technically, with $50 million in the bank, Cray has the resources to survive another 12 months or so. But its Cray 3 supercomputer, delayed at least four years, is now so late that once it finally appears, it's likely to be seen as an outmoded machine--with a $30 million price tag.

`UNDEREMPLOYED.' Long revered as the father of the supercomputer, Chairman Cray now finds himself in an awkward predicament. He has always admitted that he's short on people skills. Now, he is fully in charge at Cray Computer--the company he founded three years ago after leaving Cray Research Inc. That means he will have to turn his attention from getting the Cray 3 out the door to such mundane tasks as finding a new CEO and hunting for customers. News of Davenport's resignation drove Cray Computer stock down almost 20%, to 4--a far cry from its high of 19 1/8 last October.

It's not clear why Davenport resigned, and neither he nor Cray returned phone calls. But Jeffry Canin, an analyst at Montgomery Securities, which underwrote Cray Computer's 1991 stock offering, spoke with Davenport. According to Canin, Davenport says the decision to leave was his own. "He was itching to be more fully employed," says Canin. "Since he didn't have a product to sell, he felt underemployed."

Davenport might also have been worried he would never have a machine to sell. Cray had planned to make the Cray 3 the world's speediest computer by using an exotic circuit material called gallium arsenide, which can run three times as fast as silicon chips. But manufacturing such processors proved far more difficult than Cray had figured, requiring deft machining by finely crafted miniature robots. Now, after total development investment of nearly $350 million, a full-blown Cray 3 is still as much as a year from release.

LAB ANIMAL. In the past, customers might have waited patiently for a machine designed by Seymour Cray. No more. While Cray Computer struggles to produce a fully configured 16-processor Cray 3, competitor Cray Research already has seven orders for its Y-MP C90, a comparable 16-processor model due to ship soon. Cray Computer will try to drum up cash by selling a 4- or 8-processor version of the Cray 3, assuming it can get one working. But the company may have trouble attracting buyers for such a machine, given its track record. With no revenues from a Cray 3 coming in, Seymour Cray's plan to wow the world in the mid-1990s with a 64-processor Cray 4 looks doubtful.

Probably even more disturbing for Cray is the popular notion that his computer designs are no longer the leading edge. The new wave in heavy-duty computing, called massively parallel computing, splits problems over hundreds or thousands of microprocessors linked in a network. Seymour Cray has had no plans to work within that technology. The approach is "not as creative or as interesting as what I'm doing," he has said.

It's not likely that Seymour Cray is interested in his new management duties. On May 12, at Cray Computer's annual meeting at Colorado Springs' Antlers Doubletree Hotel, Cray is scheduled to lay out a survival strategy for his company. Chances are, the plan has him turning the problems over to a new manager fast--so he can head back to the labs.

      OCTOBER, 1983 Cray 3 supercomputer project is launched at Cray Research. 
      Production set for 1988
      MAY, 1989 Cray 3 project is set to be spun off into a separate company. The new 
      Cray Computer Corp. is led by Cray Research founder Seymour Cray. Already a 
      year late, Cray 3 hits more snags, with production now planned for winter, 1990
      APRIL, 1990 Schedule slips again; Cray 3 now due winter, 1991
      JUNE, 1991 New stock issue raises $61 million. Shares initially traded at $12.50
      DECEMBER, 1991 Tired of delays, Lawrence Livermore national lab, Cray 
      Computer's only customer, cancels its order
      APRIL, 1992 CEO Neil Davenport resigns. Bereft of customers, reclusive Seymour 
      Cray plans to announce company's strategy at May 12 annual meeting. Stock 
      trades around $4 a share
      DATA: BW
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