By Shara Tibken
Intel Corp. (>> Intel Corporation) agreed to purchase certain networking assets from supercomputer maker Cray Inc. (CRAY) for $140 million in cash, giving the chip company a boost in the high-performance computing market and strengthening Cray's balance sheet.
Intel will be buying interconnect technology and related intellectual property from Cray, which Cray has been using in its high-performing computers.
The transaction is expected to close by the end of the current quarter, and up to 74 Cray employees will be joining Intel. Cray said the lower headcount will lead to cost savings in future periods, with a "relatively modest amount" of the benefit expected in 2012.
Along with the cost savings, Cray Chief Executive Peter Ungaro said in a press release that the agreement "dramatically strengthens our balance sheet and increases our options for further growth, profitability and creating shareholder value."
Cray wasn't immediately available to comment further. A spokesman from Intel said interconnect is "another area in high-performance computing that's ripe for innovation." He added that Cray has the "best-in-class personnel and IP to do that with."
Cray shares, which were halted ahead of the news, jumped 24% to $8.75 after-hours when trading was resumed. Cray had a market capitalization of $259 million at Tuesday's close. Intel shares, meanwhile, rose 1% to $27.58 in after-hours trading.
Supercomputers help tackle the toughest scientific problems, including simulating commercial products like new drugs and defense-related applications such as weapons design and code breaking. Most of the biggest machines are used in government-owned labs, but many smaller variants have been used by companies for years in designing products like cars and drugs.
High-performance computing has been a big focus for Intel and fellow semiconductor makers Advanced Micro Devices Inc. (AMD) and Nvidia Corp. (NVDA). While supercomputing isn't a high-volume business, the processors typically are top-performing and command higher prices.
Intel has scooped up several companies of late that provide supercomputing technology. Similar to the Cray deal, Intel bought QLogic Corp.'s (QLGC) InfiniBand networking assets earlier this year for $125 million in cash.
Diane Bryant, general manager of Intel's datacenter and connected system group, noted that the acquisition of Cray's assets will help Intel achieve "exascale" computing performance, or a quintillion operations per second. That is a hundred times more than today's fastest supercomputers, and Intel hopes to reach the goal by 2018.
As for Cray, the company said it will continue to develop, sell and support current product lines, as well as its next-generation supercomputer codenamed "Cascade." It also will be able to leverage "important differentiating features of certain future Intel products," and it will be able to use the transferred technology in Cray products.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; email@example.com