Cray Joins The New Generation Supercomputer Giant Merges With Silicon Graphics Inc.

Cray Research Inc. agreed to be purchased by Silicon Graphics Inc. on Monday, ending 24 years in which it defined high technology’s frontier by creating and advancing the supercomputer.

The $736 million deal put Cray in the hands of the company best known for the workstation computers that created the visual effects in movies such as “Jurassic Park” and “Forrest Gump.”

Cray sought out the deal to assure customers of its financial stability. Silicon Graphics gets a new revenue source and potentially a way to stand out from its competitors.

Cray lost money last year, but customers placed orders in a record amounts after it introduced new machines. More recently, though, some customers had put off delivery, expressing worries about Cray’s long-term chances.

“Although I think they would have rebounded without help, when the customers start to stretch out buying decisions, when the customers start to hesitate, that’s disastrous,” said Rich Partridge, analyst at D.H. Brown Associates in Port Chester, N.Y.

Since its founding in 1972, Cray had dominated the supercomputer industry and was the U.S. standard-bearer in a contest for bragging rights about who made the world’s fastest computers.

The machines can cost several million dollars each and are used for sophisticated tasks like forecasting weather, finding oil or building bombs. But the business started to erode after the end of the Cold War reduced demand by government agencies, the military and its contractors.

“Cray was the last player standing,” said Gary Smaby, president of the Smaby Group, a Minneapolis-based consulting firm that specializes in supercomputers. “They did win out in the end, but the market that they dominate is a market that’s mature. This will be a way for them to leverage the franchise they’ve nurtured into a market that’s growing.”

The push to a more common design put much more powerful competitors against Cray, including IBM, Digital Equipment Corp., Hewlett-Packard Co., Intel Corp. and Silicon Graphics. All have machines that combine microprocessors by the dozens or hundreds to approximate the processing speed of traditional supercomputers.

“The marketplace is in transition. There are a lot of technology changes,” said Ed McCracken, chief executive of Silicon Graphics.

He called the terms of the deal “great,” but investors were less sure. Several Wall Street analysts down-graded their recommendations on Silicon Graphic’s stock, which tumbled 8 percent in New York Stock Exchange trading.

It closed down $2.12-1/2 a share to $25.37-1/2. Shares in Cray, meanwhile, climbed $3.25 to $28.50, or 13 percent, also on NYSE.

Silicon Graphics will pay $30 cash for 19.2 million shares, or about 75 percent, of Cray’s outstanding shares, a total of $576 million. It will acquire the rest in an exchange of one Silicon Graphics share for one Cray share.

J. Phillip Samper, who became chairman and chief executive of Cray Research last fall, said the company had been challenged by the industry changes.

“In order to take advantage of the great capabilities of Cray, we began a process of looking at the opportunities this particular alliance might afford us,” Samper said.