SGI Said to Be in Talks to Sell Cray Research to Gores Group

Computer maker Silicon Graphics Inc. is in talks to sell Cray Research--once one of the nation’s technological gems--to a little-known technology acquisition firm called Gores Technology Group, industry sources said.

One source said that the companies have been talking for at least two months and that Gores, with operations in Los Angeles and Boulder, Colo., originally offered $100 million for the struggling supercomputer maker. But since doing due diligence on Cray, it has lowered its offer, the source said.

Cray spokesman Steve Conway declined to comment on whom Cray is talking to, but he did say that the current merger talks are accelerating.

“Beyond just saying the talks are far along, I can’t really comment,” Conway said. Dan Gray, who works in business development at Gores Technology, also declined to comment.

SGI, based in Mountain View, Calif., announced in August that it had formed a separate business unit for Eagan, Minn.-based Cray, amid yet another restructuring at SGI and job cuts of 1,500. At the time, SGI said it was in active discussions with other companies to assume the operation of Cray through a partnership or another transaction.

Three and a half years ago, SGI paid more than $700 million for Cray, which was once the largest maker of supercomputers, the world’s fastest computers. At the time of the deal, Cray had about 4,500 employees and about $900 million in revenue, but it was struggling to grow as the budgets of its biggest supercomputer customers, U.S. research and defense departments, declined.

Cray Research was founded in 1972 by supercomputing legend Seymour Cray to develop the world’s fastest general-purpose supercomputers. Its so-called vector systems address scientific grand challenges.