Reports Positive Net Income and Increases 2009 Revenue Guidance

SEATTLE, WA -- (Marketwire) -- 08/04/09 -- Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced financial results for the second quarter ended June 30, 2009. Revenue for the quarter was $62.7 million compared to $46.7 million in the prior year period, an increase of 34 percent. The company reported net income for the quarter of $3.4 million or $0.10 per share compared to a net loss of ($6.4 million) or ($0.20) per share in the second quarter of 2008.

Total gross profit margin for the second quarter of 2009 was 45 percent compared to 33 percent in the second quarter of 2008. Product margin was 47 percent, driven by product mix and favorable costs on large system upgrades and contract closeouts. Service margin was 42 percent in the second quarter of 2009.

Income from operations for the second quarter of 2009 was $4.6 million compared to a loss from operations of ($5.7 million) in the second quarter of 2008. Included in 2009 second quarter results were non-cash items of $2.3 million for gross depreciation and amortization and $1.0 million related to stock compensation expense. Additionally, second quarter net income was negatively impacted by $1.2 million of non-cash items resulting from the adoption of a new accounting principle in the first quarter of 2009 related to the company's convertible notes.

For the six-month period ended June 30, 2009, Cray reported total revenue of $137.2 million compared to $72.9 million in the prior year period, an 88% increase. For the first half of the year, total operating expenses were $45.4 million compared to $44.0 million in the prior year period. Net loss was ($1.5 million) or ($0.04) per share for the first half of 2009 compared to a net loss of ($18.4 million) or ($0.57) per share in the prior year period. The 2009 year-to-date net income results include $3.4 million of stock compensation and $1.7 million of non-cash items related to the new accounting for our convertible notes.

As of June 30, 2009, cash and short-term investments totaled $68.9 million. During the second quarter, the company repurchased convertible notes with a face value of $27.6 million at a price of 98.5 percent of par. Following the repurchase, a face value of $164,000 in convertible notes remain outstanding.

"I am very excited about our progress year-to-date as demonstrated by our strong revenue and profit results and recent successes," said Peter Ungaro, president and CEO of Cray. "We've made tremendous progress on some of our new initiatives, expanding our product and service offerings to further solidify our leadership position in the industry and delivering our cutting-edge supercomputing technology to a broader set of customers. With a solid pipeline of opportunities and over $70 million in new wins in just the last week our investments are paying off, putting us in an excellent position to deliver continued growth and sustained profitability in 2009 and beyond."

Outlook

Cray now expects revenue in the range of approximately $290 million for 2009. Included in this revenue outlook is over $90 million of service revenue, up substantially year over year due to strong forecasted growth from custom engineering activities. Overall gross profit margin for the year is expected to be in the mid-30 percent range. Operating expenses in 2009 are anticipated to be in the range of $96 million. Results for the year include approximately $6 million of stock-based compensation. Based on the above current revenue, margin and expense assumptions, a modest income from operations for 2009 is likely.

Cray does not expect any further negative impact on net income from the new accounting principle related to our convertible notes in the second half of 2009.

The balance of the annual revenue target is expected to be weighted more heavily to the fourth quarter, which will likely have revenue of about $90 million. It is reasonably likely that the completion of a development milestone could be delayed until the fourth quarter. If this occurs, operating expenses would be about $31 million in the third quarter, although this would not affect the company's anticipated total annual operating expenses.

Cash balances are expected to improve moderately from second quarter levels during the second half of 2009.

For 2010, Cray expects its revenue to continue to grow, perhaps modestly, and expects to be profitable.

Actual results for any future period are subject to large fluctuations given the nature of Cray's business.

Recent Highlights

--  In July, Cray was awarded a multi-phase, multi-year contract with the
    Department of Energy's National Energy Research Scientific Computing Center
    (NERSC) located at the Lawrence Berkeley National Laboratory.  The
    contract, valued at more than $50 million, includes the delivery of a Cray
    XT5 supercomputer which will be upgraded to a future-generation Cray
    supercomputer.  The full system is expected to go into production in late
    2010.
--  In August, Cray was awarded a contract to upgrade the Cray XT5
    supercomputer (called "Jaguar") at Oak Ridge National Laboratory.  Jaguar,
    the first and only computer in the world to run real-world, scientific
    applications at over a sustained petaflops (quadrillion mathematical
    calculations per second), will be upgraded to a peak capacity exceeding two
    petaflops, solidifying its position as the world's most powerful
    supercomputer.  The upgrade is expected to be installed and accepted by the
    end of 2009.
--  In July, Cray was selected by the Korea Meteorological Administration
    (KMA) as the preferred bidder for a multi-year contract to provide KMA with
    a next-generation supercomputer.  Contract negotiations are currently
    underway and an official announcement will be made once the contract has
    been completed.  Assuming successful completion of these negotiations,
    revenue on this contract would likely be in 2010.
--  In July, Cray announced that the Finnish Meteorological Institute
    (FMI) in Helsinki, Finland selected a Cray XT5m supercomputer to replace
    its existing system.  With ten times more computing power than the previous
    system, FMI will be able to deliver increasingly accurate weather
    forecasts.