Cray Inc. (cray)

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CRAY: Cray Takes Supercomputing to Mass markets
By Brian Prescott
Aug 13, 2012 10:53:49 AM PDT

There is something about specialty players operating in an oligopolistic market. Cray Inc (NASDAQ: CRAY) is an apt example of such a player. The company designs, develops, and produces high-performance computing systems and provides engineering services related to such systems. There are only a handful of players in this space and probably this explains the 78 per cent jump registered in the stock so far this year.

Incidentally, Cray is a featured stock on Small Cap Network but there is a better rationale for making it a featured stock than just the price appreciation in the past. The strength and robustness of the company’s underlying technology places it ahead of competition which also includes likes of IBM. Cray’s flagship product, the Cascade supercomputer system, finds its roots in the Defense Advanced Research Projects Agency’s (DARPA) High Productivity Computing Systems (HPCS) program.

The Cascade system is based on next-generation Intel Xeon processors but supports a multiple processor lineup of Intel and AMD x86 processors and emerging accelerator alternatives. Meanwhile, the company continues to win more contracts. It was recently awarded a $21 million contract from Australia’s Commonwealth Scientific and Industrial Research Organisation for installing the Cascade supercomputer and a next-generation storage system. Another $40 million contract has been awarded by the Department of Energy for its National Energy Research Scientific Computing Center (NERSC). It will likely keep adding more to the list as supercomputers’ target market broaden from academics and research institutes to more real world applications. The NERSC, for example, plans to make use of the supercomputer in various walks of everyday life including materials science, chemistry, geosciences, fusion energy, astrophysics, nuclear and high-energy physics.

Looking at all this, it is no surprise that analysts at Needham have a ‘Buy’ rating on the stock with a target price of $14, representing a potential upside of 24 per cent from the current market price of $11.3. Limited competition in this capital intensive business means profit margins are excellent. The company is virtually debt free and trades at a forward price earnings ratio of just 17.2.
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http://www.smallcapnetwork.com/CRAY-Cray-Takes-Supercomputing-to-Mass-markets/s/via/3445/article/view/p/mid/1/id/582/

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