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Cray (CRAY) Posts Narrower Than Forecast 3Q Loss; To Buy Appro International

 November 09, 2012 07:44 AM

(By Balaseshan) Cray Inc. (NASDAQ: CRAY) reported a narrower than expected third quarter loss on partial reduction of its incentive-based compensation accrual. Further, the supercomputers maker guided full year to be solidly profitable.

In a separate release, Cray said it has agreed to buy privately-held advanced scalable supercomputing services developer Appro International Inc. for about $25 million in cash.

The acquisition is expected to contribute at least $60 million in revenue and add about $15 million in operating expenses in 2013 (excluding potential purchase cost adjustments).

Loss for the third quarter narrowed to $5.15 million or $0.14 per share from $12.23 million or $0.35 per share last year.

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Total revenue declined to $35.74 million from $36.71 million.

Analysts, on average, polled by Thomson Reuters had expected a loss of $0.48 per share on revenue of $30 million for the third quarter.

Gross margin expanded to 48% from 44%, benefiting from a partial reduction of the company's year-to-date incentive-based compensation accrual. For the third quarter, product margin was 43% and service margin was 54%.

Looking ahead into the fiscal 2012, the company expects to be solidly profitable, independent of the $139 million pre-tax gain on the development program divestiture that occurred during the second quarter. Cray anticipates total revenue to be in the range of $450 million. Street predicts profit of $4.38 per share on revenue of $438.41 million for the fiscal 2012.

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For 2012, overall gross margins are anticipated to be in the 35% range and total operating expenses are expected to be about $120 million. The impact of the planned acquisition of Appro is not included in Cray's 2012 outlook as the transaction is not yet closed.

For 2013, Cray expects revenue to grow slightly as compared to 2012. Gross margins are predicted to be in the mid-30% range. Total operating expenses are anticipated to rise significantly year-over-year due to higher investments in storage and big data initiatives, completion of DARPA program, annual compensation increases, as well as the Appro acquisition. Based on this outlook, Cray expects to be profitable for 2013.

CRAY closed Thursday's regular session at $12.01. The stock has been trading between $5.29 and $13.56 for the past 52 weeks.



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