Advertisement

TECHNOLOGY : Cray Stock Sinks in Wake of Plan to Split Into Two

Share via
From Reuters

Cray Research Inc., the nation’s sole surviving supercomputer maker, held its annual meeting amid turmoil Tuesday as its shares plunged on Wall Street one day after it announced a dramatic restructuring.

Also, in an announcement apparently timed to rally shareholders at the meeting, Cray said it had entered an agreement with Control Data Corp. for the joint marketing of supercomputers.

Cray’s stock skidded $6 a share to close at $49.75 on the New York Stock Exchange in what some analysts called a reaction to diminished takeover prospects for the newly divided company.

Advertisement

Analysts were initially split over whether Cray’s plan was an earnest attempt to wring more profit from its ultra high-tech products or simply a way to fend off a rumored takeover.

The pact with Control Data teams Cray with a cross-town rival that only recently said it would leave the supercomputer manufacturing business. Under a joint marketing agreement, Control Data will sell the full line of Cray computers to its own customers.

The two companies said they will explore opportunities to develop, enhance and market new and existing products that will provide links between Control Data’s Cyber line of computer products and Cray supercomputers.

Advertisement

The objective is to offer “a seamless network of computing power including supercomputers, mainframes, information servers, network servers and workstations,” they said.

Confusion Among Analysts

“This is an important step in providing our customers excellent alternatives to solve their future supercomputing requirements,” said James Ousley, computer products group president for Control Data, which announced April 17 that it was discontinuing its ETA supercomputer product line.

Cray’s plan to split the company in two continued to sow confusion among industry analysts.

Advertisement

Some said Cray may be spawning its own competition by splitting off its developmental Cray-3 supercomputer from its established products.

“In a sense they’re breeding their own competition,” said Roger Redmond of Piper Jaffray & Hopwood.

Jeffry Canin, an industry consultant, had predicted a setback in the stock “because of potential future competition. If the (Cray-3 operation) is successful, there’s only one place to take market share from: Cray.”

Advertisement