Silicon Graphics Inc yesterday announced that it would acquire Cray Research Inc in what looks like one of the untidiest computer industry takeovers for several years. The two-part deal initially sees it tendering $30 a share cash for 75% of the shares out, against Friday’s closing price of $25.25. The combination is messy because Cray currently uses Sparc RISCs in its high-end servers – high-end in terms of the generality of servers, low-end as far as Cray’s product line is concerned, and Alpha RISCs in its T3D and T3E massively parallel, where Silicon Graphics is keeper of the MIPS Technologies Inc R-series design. The conflict is so graphic that analysts that got wind of the deal doubted that it would be more than some kind of loose alliance. But it appears that some kind of deal was forced on Cray because after losing $226m after $188m in charges last year on sales that plummeted 27% to $676m, its blue-chip government customers were reluctant to give more business to Cray on grounds that it might not survive for the term of the contract. Cray has always said that the Digital Equipment Corp Alpha RISC was in no way a lock-in, and that it had written the code base in such a way that it could switch to a different RISC with a minimum of disruption. As for the Sparc-based servers, some see Cray selling this product line to Sun Microsystems Inc. The offer is subject at least 51% of Cray’s shares being tendered, and once Silicon Graphics has control, the balance of the Cray shares will be swapped for its own shares on a one-for-once basis. Total value of the deal would be about $750m, $575m of it in cash. Silicon Graphics Inc is on target for sales of almost $3,000m this fiscal to June 30. Cray’s sales plunged 26.6% to the $676m figure. Its high-water mark was 1994 when its sales reached $921m. Silicon Graphics said it expects to take a non-cash charge on the deal of $50m to $100m at closing.
