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HPE to acquire supercomputer manufacturer Cray for $1.3 billion

May 22, 2019 by Sam Francis

Hewlett Packard Enterprise has reached an agreement to acquire Cray, the manufacturer of supercomputing systems.

HPE says the acquisition will cost $35 per share, in a transaction valued at approximately $1.3 billion, net of cash.

Antonio Neri, president and CEO, HPE, says: “Answers to some of society’s most pressing challenges are buried in massive amounts of data.

“Only by processing and analyzing this data will we be able to unlock the answers to critical challenges across medicine, climate change, space and more.

“Cray is a global technology leader in supercomputing and shares our deep commitment to innovation.

“By combining our world-class teams and technology, we will have the opportunity to drive the next generation of high-performance computing and play an important part in advancing the way people live and work.”

The explosion of data is driving strong HPC growth

The explosion of data from artificial intelligence, machine learning, and big data analytics and evolving customer needs for data-intensive workloads are driving a significant expansion in HPC.

Over the next three years, the HPC segment of the market and associated storage and services is expected to grow from approximately $28 billion in 2018 to approximately $35 billion in 2021, a compound annual growth rate of approximately 9 percent.

Exascale computing is a growing segment of overall HPC opportunities and more than $4 billion of exascale opportunities are expected to be awarded over the next five years.

Addressing complex challenges and advancing critical academic research, including predicting future weather patterns, delivering breakthrough medical discoveries, and preventing cyber-attacks, requires significant computational capabilities, up to and through exascale level architecture.

Exascale capable systems enable solutions to these problems with much greater precision and insight.

Peter Ungaro, president and CEO of Cray, says: “This is an amazing opportunity to bring together Cray’s leading-edge technology and HPE’s wide reach and deep product portfolio, providing customers of all sizes with integrated solutions and unique supercomputing technology to address the full spectrum of their data-intensive needs.

“HPE and Cray share a commitment to customer-centric innovation and a vision to create the global leader for the future of high-performance computing and AI.

“On behalf of the Cray Board of Directors, we are pleased to have reached an agreement that we believe maximizes value and are excited for the opportunities that this unique combination will create for both our employees and our customers.”

Cray is a leading innovator in supercomputer solutions

Cray is the premier provider of high-end supercomputing solutions that address customers’ most challenging, data-intensive workloads for making critical decisions.

Cray has a leadership position in the top 100 supercomputer installations around the globe. With a history tying back to Cray Research, which was founded in 1972, Cray is headquartered in Seattle, Washington, with US-based manufacturing, and approximately 1,300 employees worldwide.

The company delivered revenue of $456 million in its most recent fiscal year, up 16 percent year over year.

Cray’s supercomputing systems, delivered through their current generation XC and CS platforms, and next-generation Shasta series platform, have the ability to handle massive data sets, converged modeling, simulation, AI, and analytics workloads.

In addition to supercomputers, they offer high-performance storage, low-latency high-performance HPC interconnects, a full HPC system software stack and programming environment, data analytics, and AI solutions – all currently delivered through integrated systems.

Cray recently announced an Exascale supercomputer contract for over $600 million for the US Department of Energy’s Oak Ridge National Laboratory.

The system, which is targeted to be the world’s fastest system, will enable groundbreaking research and AI at “an unprecedented scale”, using Cray’s new Shasta system architecture and Slingshot interconnect, according to HPE.

The company was also part of an award with Intel for the first US Exascale contract from the US Department of Energy’s Argonne National Laboratory, with Cray’s portion of the contract valued at over $100 million.

Cray strengthens and expands HPE’s high-performance computing portfolio

High-performance computing is a key component of HPE’s vision and growth strategy and the company currently offers world-class HPC solutions, including HPE Apollo and SGI, to customers worldwide.

This portfolio will be further strengthened by leveraging Cray’s foundational technologies and adding complementary solutions.

The combined company will also reach a broader set of end markets, offering enterprise, academic and government customers a broad range of solutions and deep expertise to solve their most complex problems.

Together, HPE and Cray will have enhanced opportunities for growth and the integrated platform, scale and resources to lead the Exascale era of high-performance computing.

The combination of HPE and Cray is expected to deliver significant customer benefits including:

  • future HPC-as-a-Service and AI / ML analytics through HPE GreenLake;
  • a comprehensive end-to-end portfolio of HPC infrastructure – compute, high-performance storage, system interconnects, software and services supplementing existing HPE capabilities to address the full spectrum of customers’ data-intensive needs;
  • differentiated next-generation technology addressing data-intensive workloads;
  • increased innovation and technological leadership from leveraging greater scale, combined talent and expanded technology capabilities;
  • enhanced supply chain capabilities leveraging US-based manufacturing; and
  • significant economic upside expected to be realized from the combination.

Bringing together HPE and Cray enables an enhanced financial profile for the combined company that includes several revenue growth opportunities and cost synergies.

The companies expect the combination to drive significant revenue growth opportunities by:

  • capitalizing on the growing HPC segment of the market and Exascale opportunities;
  • enhancing HPE’s customer base with a complementary footprint in federal business and academia and the company’s ability to accelerate commercial supercomputing adoption; and
  • introducing new offerings in artificial intelligence, machine learning and HPC-as-a-service with HPE GreenLake.

HPE also expects to deliver significant cost synergies through efficiencies and by leveraging proprietary Cray technology, like the Slingshot interconnect, to lower costs and improve product performance.

Transaction details

As a result of the enhanced financial profiles of the combined companies, the deal is expected to be accretive to HPE non-GAAP operating profit and earnings in the first full year following the close.

As part of the transaction, HPE expects to incur one-time integration costs that will be absorbed within HPE’s FY20 free cash flow outlook of $1.9 billion to $2.1 billion that remains unchanged.

The transaction is expected to close by the first quarter of HPE’s fiscal year 2020, subject to regulatory approvals and other customary closing conditions.

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Filed Under: Computing, Features Tagged With: billion, company, computing, cray, customers, data, exascale, expected, growth, high-performance, hpc, hpe, opportunities, solutions, supercomputing, technology

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