Cray Swings to Loss, Revenue Decline as Challenges Mount - Page 2

The company also has been working to integrate new chips into its systems. The work with Intel's new Xeon "Broadwell" chips has gone smoothly, but there have been technical issues that are being dealt with concerning Intel's new Xeon Phi 7200 "Knights Landing" processors, which come with up to 72 cores and became generally available in June. Intel expects the chips to be widely adopted in the HPC space to run such emerging workloads as machine learning and artificial intelligence.

"On Knights Landing, we're continuing to work through technical issues that could impact performance and further impact timing, especially as we scale up to large systems," Ungaro said. "However, while we continue to work with Intel and their partners to resolve these remaining issues, we began shipping these processors in our XC and CS supercomputers and have been for a couple of months now."

Regarding Nvidia's GPUs based on the chip maker's Pascal architecture, Cray has the graphics cards in-house and is continuing to test them and scale them to get into larger systems.

"We expect to begin receiving these processors in volume shortly, and we plan to begin shipping them to customers for significant deliveries later in the year," the CEO said. "We're still behind our original integration schedule here. Ultimately, we expect to work through the remaining issues on each of these processors to achieve the anticipated acceptances before the end of the year."

The incident with the electrical smoke damaged five smaller customer systems that company officials had expected to be accepted before the end of the year. The cost to the company will be covered by insurance, but it will put it behind schedule because components will need to be reordered, rebuilt and tested, and the impact to the company's revenues this year could be $20 million to $60 million.

The revenue won't be lost, Ungaro added, only pushed into 2017.

The various issues overshadowed such gains as new product launches in such areas as compute, storage and analytics, and new customer installations, he said.