TIME: Almanac 1993/TIME Almanac 1993.iso/time/052989/05298900.013

Text File | 1992-09-23 | 5.7 KB | 110 lines

                                                                                BUSINESS, Page 70

Computer Chip off the Old Block


Genius Seymour Cray and the company he founded split up


    For nearly two decades, the name Cray Research has been
synonymous with supercomputers, those lightning-fast machines
used for everything from locating oil deposits to designing
nuclear warheads. Not only had Cray seized nearly two-thirds of
the world market for number crunchers in the $5 million-to-$25
million range, but it held exclusive license to sell any machine
made by Seymour Cray, who is to supercomputers what Alexander
Graham Bell was to the telephone.

    Now Cray and the company he founded have decided to go
their separate ways. In an unexpected move, the firm announced
last week that it was splitting into two rival entities: Cray
Research, based in Minneapolis, and Cray Computer, based in
Colorado Springs and headed by Seymour Cray. The new company,
financed with $150 million in cash and equipment from its parent
firm, will devote itself to developing the long-awaited Cray-3,
a computer that will compete head on with the next generation
of supermachines produced by Cray Research. "It's a stunning
development," says Gary Smaby, an analyst with Needham & Co.
"For a company to set up and fund a direct competitor must be
unprecedented."

    The dramatic breakup was the latest of several surprises
that rocked the intensely competitive industry this spring. In
April NEC, one of Japan's three supercomputer makers, announced
a machine it claims is eight times faster than the speediest
Cray. A week later Cray's crosstown rival Control Data declared
that after five years and $238 million in losses, it was closing
its supercomputer subsidiary, ETA Systems. That left Cray as the
last U.S. company still racing the Japanese for pre-eminence in
what both countries view as a technology critical to the future
of science and industry.

    All this made the U.S. supercomputer effort even more
dependent on one man: Seymour Cray. At 63, Cray is one of the
most enigmatic figures in computer science. A restless, rugged
individualist of legendary idiosyncrasy (for many years he made
a point of building a new sailboat every winter and,
inexplicably, burning it in the fall), he has devoted his
professional life, first at Control Data and later with his own
firm, to building the world's most powerful computers. His track
record: an unequaled series of five major computer designs
dating back to 1960, each for what would be the fastest machine
of its time.

    The Cray-3 was to be his most impressive to date. People
who have seen prototypes describe it as a technological tour de
force. To minimize the distance electrons have to move within
its components, Cray is squeezing chips capable of 16 billion
calculations per second into a tight octagonal package 32 in.
across, the size of a small coffee table. The computer's basic
building blocks are 4-in. by 4-in. modules each bejeweled with
1,024 chips and threaded with more than a million interconnects
of braided gold wire thinner than a hair.

    But designing a supercomputer and getting it to market are
two different things, and with his latest machine Cray may have
pushed the technology one step too far. Not only does the
16-processor Cray-3 contain four times as many central
calculating units as the Cray-2 (an increase that more than
quadruples its complexity), but it relies on an as-yet-unproved
technological advance: replacing silicon chips with faster ones
made of gallium arsenide. Add to Cray's headaches the fact that
his new computer is so compact that assembly by hand is
difficult. Before production could begin, he would have to endow
robots with the manipulative skills of a jeweler or watchmaker.

    Cray Research, meanwhile, has had other troubles. Sales are
sluggish, profits are down and its stock price has plummeted.
With R. and D. expenses growing nearly 35% a year, Chairman
John Rollwagen found himself having to choose between two
projects: the Cray-3 and the C-90, an extension of the company's
bread-and-butter Cray Y-MP line.

    As Rollwagen tells it, the decision turned on a chat he and
Cray had four weeks ago in Colorado Springs. "I said to him,
`It's not working, is it, Seymour? It isn't feeling right.'"
The two discussed options short of a total split, but Cray kept
pressing. "It's almost like he forced me to turn the page," says
Rollwagen. "He said, `Isn't there (an option) that would be even
cleaner? Let's get on to that one.' It just became very clear
to the two of us that this was the right thing to do."

    Reaction was swift. On Wall Street Cray's stock fell 10% in
one day. In Japan some thought they smelled a "political
maneuver." Since U.S. agencies like to have at least two bidders
on any contract, the exit of ETA opened a window of opportunity
for Cray's Japanese rivals. The Cray split, they suspect, may
have been designed to close that window. Cray officials do not
deny it. Chuckles one: "They got the message in a hurry."

    Surprisingly, given the relative sizes of the two Crays,
some experts voice more concern about the future of Cray
Research than they do about Cray Computer. Few doubt that the
smaller spin-off firm will be able to raise all the money it
needs. As John Sell, president of the Minnesota Supercomputer
Center, puts it, "Seymour is magic in this business." Whether
Cray Research can flourish without its founding genius remains
to be seen. Analysts say that within three to five years it
should be clear whether the company has wisely cut its losses
or created a killer competitor by trading away its most valuable
asset.