Needham Downgrades Cray to 'Hold'
Needham downgraded Cray (CRAY ) to hold from buy.
Analyst Charles Wolf says the possibility of a huge upside revenue and earnings per share surprise in 2004, which was the key reason for his buy rating, has effectively disappeared. Wolf says he initiated Cray with buy on the possibility it might receive a $200 million order for its new X1 machine from Oak Ridge National Labs to build the most powerful supercomputer on earth; the order could have boosted Cray's $315 million 2004 revenues to $465 million, and boosted the 40 cents earnings per share to 90 cents.
Unfortunately, the proposed federal government budget for fiscal 2004 will allocate less money for its supercomputer project than it had requested, and the administration rejected Oak Ridge's requests for funds to build this computer.