Intel to use Cray IP to score boffo DARPA dosh

HPC blog In a bold and unexpected move, Intel bought out rights to Cray’s networking and interconnect technology a couple of days ago for $140 million in cold, hard cash. Like our pal TPM said in his comprehensive story, it was quite a surprise to HPC industry watchers. I hadn’t heard speculation about Cray looking to sell any assets. In fact, given the recent introduction of their Big Data play, YarcData, I had expected any Cray M&A news to be about their acquisition of some analytics pieces to round out their offerings.

(The name “YarcData” reminds me of the sound I heard late one night when a coyote surprised a duck. Yeah, I get it: ‘Yarc’ is Cray spelled backwards. That’s a nice touch, I guess, but I don’t understand why they wouldn’t use the Cray name for this new division. Cray has been synonymous with advanced technology, supercomputing, and the like since its origin in 1972. That’s 40 years – longer if you factor in Seymour Cray’s years with Control Data in the 1960s.)

When Intel’s $140m gets deposited into Cray’s bank account, what’ll they do with it? With they put it in savings or checking? This is a big windfall, particularly when you consider that Cray’s entire 2011 revenue was $236m. They did significantly better in 2010 at $319m, but that’s the supercomputer business for you. Revenue is notoriously rocky, since your customers don’t make payments until you hit the prescribed milestones or until systems are thoroughly tested.

Having a big cash balance in the bank would help to smooth out the revenue rollercoaster a bit. But I think that they’ll be looking to buy some reasonably-priced IP to add vertical solutions to the YarcData Urika portfolio. It’s a hell of a system, but highly customised and specialised to attack a very specific type of problem. Tim does a great job of discussing the system and graph analysis here.

So what’s Intel getting out of this? They aren’t getting exclusive use of Cray’s tech – Cray still gets to use it in systems and can continue to develop it. My sources say that Intel probably made the purchase in order to be better positioned to score more US Department of Energy and DARPA exascale grants. These subsidies can run into amounts that, in aggregate, dwarf the amount they paid for Cray’s network stuff. It’s also likely that Intel, using Cray’s technology, might have a better chance at scoring bigger grant bucks than Cray on its own.

Cray’s IP could also give Intel a patent portfolio they can use to mercilessly bludgeon competitors into submission and servitude. Cray has been around long enough to have a patent on almost anything that runs through a wire, although these rights could have been diluted over the years. ®

To me, however, the ability to monetise and weaponise the patents is just frosting on the cake in this deal. The real value here is to reel in government subsidies to help defray the cost of Intel R&D. ®