Hewlett Packard Enterprise Co. today announced that it has inked a $1.3 billion deal to acquire Cray Inc., a move poised to catapult the company to the forefront of the growing supercomputing market.

The $1.3 billion price tag breaks down to $35 per share, a 17% premium to Cray’s Thursday closing price. The deal is HPE’s largest acquisition since it split off from Hewlett-Packard Co. in 2015 to become an independent company.

Cray was founded in 1972 by Seymour Cray, the engineer credited with creating the supercomputing industry, and has built many of the machines on the TOP500 index of the world’s fastest supercomputers. The company has recently also taken on a key role in the U.S. government’s push for “exascale” computing. An exaflop represents a million trillion calculations per second, or five times the maximum speed of the world’s fastest supercomputer.

Cray is currently building two exascale systems for the U.S. Department of Energy. The first is set to cost $500 million and will serve the Argonne National Laboratory in Chicago, while the second supercomputer, with a projected price of $600 million, will put 1.5 exaflops at the disposal of researchers at  the Oak Ridge National Laboratory.

HPE sees a big revenue opportunity in the race to exascale computing. In the acquisition announcement, the company said that more than $4 billion worth of exascale projects are expected to be awarded over the next five years. The high-performance computing segment as a whole, in turn, is projected to grow from $28 billion last year to about $35 billion by 2021.

“HPC is one of the fastest-growing markets and HPE has communicated its intent to do better in the market,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “Therefore I’m not surprised at it. Its degree of success will be determined by the integration of the two companies.”

On top of Cray’s customer base and talent, the acquisition will also buy HPE an expansive portfolio of supercomputing technologies. The firm has developed a computer architecture called Shasta designed specifically for use in exascale systems. Cray also sells a supercomputer-optimized networking technology called Slingshot, storage equipment and artificial intelligence software, among other products.

HPE, for its part, is no stranger to the high-performance computing market either. The company has built systems for organizations such as the Pittsburgh Supercomputing Center and BASF SE, the world’s largest chemical producer.

“HPE brings increased scale and some unique consumption models and Cray brings expertise and unique connectivity IP,” Moorhead said.

HPE said that it will build on the acquisition by adding new high-performance computing products to its GreenLake product lineup, which allows companies to buy hardware on a pay-as-a-you go basis. It also plans to introduce HPC solutions optimize for artificial intelligence workloads.

The company expects to close the acquisition in the first quarter of 2020. HPE said that the expense of integrating Cray into its business won’t affect its free cash flow forecast for the year, with the deal set to facilitate certain cost synergies in the long run.  

Photo: Lawrence Berkeley National Laboratory