SGI has sold Cray Research to Tera Computer, a rival supercomputer maker that is a fraction of its size, for what is believed to be considerably less than it originally paid.
The hardware supplier plans to sell the Cray business for cash, notes and common stock, but did not disclose financial details.
People familiar with the situation, however, valued the deal at less than $100m - a fraction of the $740m SGI paid for the firm in 1996. Tera generated third quarter sales for fiscal 1999 of $849,835.
But the pact partly reflects cost cutting pressures on SGI, which announced last summer that it planned to sell Cray. The company was founded in 1972 by Seymour Cray.
Following completion of the purchase, Tera plans to create a new combined company called Cray Inc, which will generate annual revenue of more than $200m. It will also have about 900 employees, 750 of which will be in the US, 100 in Europe and 50 in Asia Pacific.
Jim Rottsolk, Tera's president and chief executive, said: "The Cray acquisition advances Tera's growth strategy by creating a profitable, new company with a strong infrastructure."
Under the terms of the agreement, Tera will have the rights to both the Cray brand and SGI's Cray supercomputer product line, existing service contracts and future Cray vector supercomputer products. Tera will also maintain three manufacturing facilities in Wisconsin.
Debra Goldfarb, IDC's group vice president of worldwide systems and servers, said: "Cray will reinvigorate the global high performance sector by focusing on serving the needs of customers who want to solve the most demanding problems."
"IDC has extensively researched the requirements of these high-end customers and found that their application demands far exceed currently available technology," she added.
IDC forecasts that the total market for high performance systems will steadily climb to about $7.5bn in 2003 from $5bn this year.
Entrepreneurs Jim Rottsolk and Burton Smith founded Tera in 1987. The company, which went public in 1995, has shipped one machine to date.
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