HPE is doubling down on the supercomputing game, announcing plans Friday to acquire Seattle’s Cray for $1.3 billion in a deal that links two iconic brands in computing history.
The all-cash transaction, at $35 a share, is a 17 percent premium over Thursday’s closing price of $29.81 for Cray’s stock. HPE said it intends to merge Cray’s supercomputing product lineup within its roster of server and high-performance computing products, and the deal is expected to close in the first fiscal quarter of HPE’s 2020 fiscal year subject to the approval of Cray’s shareholders.
“We will have the opportunity to drive the next generation of high performance computing and play an important part in advancing how people work,” said Antonio Neri, president and chief executive officer of HPE, on a conference call following the announcement of the deal.
Cray’s massive computers are used by some of the leading research institutions in the world to process outsized amounts of data and complex algorithms. The company employs 1,300 people worldwide and is based in downtown Seattle, recording $456 million in revenue during its last fiscal year.
In an interview with GeekWire, Cray CEO Peter Ungaro said it decided to join forces with HPE — a competitor in high-performance computing — because HPE would allow Cray to sell into new markets beyond its traditional strength among government and educational research customers.
“We’re just about to launch our next generation of technology that we think has a chance to penetrate a much broader market,” Ungaro said. “HPE has the breadth and reach to do that in a way we wouldn’t be able to do ourselves.”
At one point, the former Hewlett-Packard and Cray were two of the most powerful computer makers in the world, but a lot has happened since Seymour Cray, Bill Hewlett, and Dave Packard were titans of tech.
Cray built some of the first so-called “supercomputers,” massively powerful machines that were used for weather and energy research before merging with Silicon Graphics in the 1990s and eventually spinning off Cray Research as part of Seattle’s Tera Computing Corporation, later renamed Cray Inc. For its part, HP survived a tumultuous decade in the 2000s before separating into two companies focused on consumer hardware (HP Inc.) and enterprise computing (HPE) under former CEO Meg Whitman.
The cloud computing era has changed the fortune of both companies, however, as sales of traditional data center hardware flatline amid the move to the cloud. HPE said it will look to offer Cray’s supercomputers as a service through HPE Greenlake, and Cray will likely continue supplying supercomputers to big customers like the U.S. Department of Energy, which just purchased a $600 million system from Cray that will be the world’s fastest supercomputer as of the moment.
It also sounds like HPE is hoping to bring some of the component technologies Cray has developed to serve high-performance computing customers into some of its other hardware products. Neri said that HPE would look at integrating Cray’s Slingshot interconnect into other products, and some of Cray’s software might also be appropriate for HPE data center customers running large installations.
HPE’s stock rose 1.2 percent on news of the deal, but financial analysts on the conference call seemed skeptical about the growth prospects that Cray would bring to HPE given the limited nature of its customer base. Looming over everything, of course, is the specter of cloud providers like Amazon Web Services and Microsoft getting deeper into high-performance computing as a service, although Neri implied that was not a short-term concern given the specialized hardware needed to achieve those levels of performance.
Cray will continue to operate out of downtown Seattle, where it has about 115 employees out of its 1,300 worldwide, Ungaro said. Much of Cray’s headcount is in Minnesota and at its manufacturing facility in Chippewa Falls, Wisc.
[Editor’s note: This post was updated several times as more information became available.]