NEC invests $25 m. in Cray to end feud

Edmund Klamann

TOKYO: Japanese computer and chip maker NEC Corp on Wednesday invested $25

million in Cray Inc, putting an end to the decade-long trade dispute with the

US-based supercomputer maker. Apart from buying $25 million in non-voting

preferred shares, NEC would also give Cray exclusive rights to distribute its

high-end vector supercomputers in North America.

The deal, however, has a rider attached. Cray has been asked to drop its

anti-dumping case against NEC that led to the Department of Commerce slap a 454

per cent duty on NEC vector supercomputers in 1997 that effectively shut it out

of the US market. "I think they've come to understand our true

position," NEC senior vice president Kazuhiko Kobayashi told reporters

after a news conference.

Since the 1980s, Japan's supercomputer makers, led by NEC and Fujitsu Ltd.,

have battled fiercely with Cray's predecessor, Cray Research Inc, exchanging

barbed charges of unfair market barriers and threats to national security. But

the once hotly contested market is now only a shadow of its former presence in

the high-tech sector.

Expensive niche



While they still occupy an important niche for simulating automobile crashes
or climate changes, many of the complex calculations that were once the sole

domain of the massive machines can now be carried out by clusters of relatively

cheap microprocessors strung together.

NEC's estimated worldwide sales of vector supercomputers, high-end machines

that comprise about half the total supercomputer market, would be less than $600

million this year, compared with $800 million nearly five years ago. Cray has

also watched its fortunes wane in recent years, with sales in the nine months to

September 30 was only $85 million a mere one-tenth annual sales levels during

Cray Research's heyday in the early 1990s.

In 1996, Cray was acquired by Silicon Graphics Inc only to be sold for a

fraction of its original price to Seattle-based Tera Computer in 2000. The new

firm quickly capitalized on Cray's legacy by renaming itself Cray Inc. NEC said

the deal would also give Cray non-exclusive rights to sell its SX-5 series

vector supercomputers in Europe and elsewhere, after confirming this would not

conflict with anti-trust laws.

NEC did not disclose the price of its supercomputers, although they are

typically leased for about 3.9 million yen ($33,600) a month in Japan, a

spokesman said. The news came after the Tokyo stock market closed. Shares in NEC

ended at 1,909 Yen on Wednesday, down 3.19 per cent, after a slide on the Nasdaq

battered Japanese high-tech shares.

(C) Reuters Limited 2001.