Cray co-founder leaving for position at Microsoft

The overhaul of supercomputer maker Cray accelerated Friday when the Seattle-based company announced that co-founder and chief scientist Burton Smith will leave Dec. 7 to join Microsoft.

Smith will be a technical fellow, said Lou Gellos, a Microsoft spokesman. Gellos did not have any additional details about Smith's duties.

"The only thing he's told us is the role will be really different" from what he was doing at Cray, said Steve Conway, a Cray spokesman.

Smith leaves Cray less than four months after the company's other co-founder, James Rottsolk, retired in August.

Smith and Rottsolk started Tera Computer in Washington, D.C., in 1987 and moved it to Seattle a year later. The company merged with Cray Research in 2000.

Cray remains a leader in the design and development of ultra-powerful computers capable of quickly crunching enormous amounts of data, but it has struggled financially in recent years.

Cray lost $55.1 million in the first nine months of 2005, an improvement from a $169.3 million loss in the same period a year ago but still an onerous amount of red ink for a company its size. Cray had total sales of $135.8 million in the first nine months of 2005.

The company launched several cost-cutting initiatives last spring to improve its profitability. It cut 90 workers, or roughly 10 percent of its global workforce, and scaled back certain research and development projects.

It also increased its emphasis on sales, customer support and timely execution of existing contracts.

Alan Davis, an investment analyst who follows Cray for Seattle-based McAdams Wright Ragen, thinks Smith's departure has been in the works for some time.

"This appears to be part of the transition to becoming a market-focused company," Davis said. "A loss for the company, but probably a good change in the bigger picture."

Smith's hiring at Microsoft follows the appointment earlier this year of Ray Ozzie, creator of Lotus Notes, as Microsoft's chief technology officer. At a supercomputing conference this month in Seattle, Chairman Bill Gates urged software makers to build more programs for supercomputers for scientific tasks, including airplane testing.

"The Web is increasingly going to be driven by supercomputers," said Paul Saffo, a technology forecaster in Silicon Valley, Calif. "This is just the latest chapter in the arms race between Microsoft and Google."

Cray is not concerned that Smith might help Microsoft encroach on its small but sophisticated corner of the computing market.

"Microsoft is coming at it at the lower price point part of the [supercomputer] market," Conway said. "From what Bill Gates was talking about, its not really someplace where the two companies compete."

Smith's duties will be absorbed by Steve Scott, Cray's chief technology officer, Conway said.

"As our chief scientist and an important leader of our research and development team, Burton has provided innovation and technical leadership to Cray for many years," said Cray Chief Executive Peter Ungaro in a statement.

Cray did not disclose whether it will incur any severance expenses related to Smith's departure.

Cray paid roughly $1.2 million to Rottsolk following his August retirement, the company disclosed in its most recently financial report.

"I have truly enjoyed my long association with Cray and the opportunity to spend many years at the forefront of high performance computing," Smith said in the statement. "Although I am excited to pursue a new and very different opportunity at Microsoft, I will miss being part of this team and wish Cray continued success."

Information from Bloomberg News is included in this report.

Information in this article, originally published November 26, 2005, was corrected November 29, 2005. The chief technology officer of Cray Inc. is Steve Scott, not Steve Smith as reported in a previous version of this story.