Cray
Cray CEO Peter Ungaro
- Peter Ungaro, the CEO of Cray, was only 35 when he took over the supercomputer maker in 2005.
- He does not have a tech background, but he fell in love with supercomputers and came to master the market.
- He led the company through a difficult period and presided over its transformation into a stronger player in supercomputers - and ultimately, to a $1.3 billion sale to HPE, announced earlier this year.
- But analysts say selling Cray to HPE is a pragmatic move, even as they praised the way Ungaro led the company over the past 14 years.
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Peter Ungaro was a 35-year old sales executive at Cray in 2005 when he got an unexpected offer: Co-founder Jim Rottsolk wanted to step down as CEO and have Ungaro take his place.
"I remember it very vividly," he told Business Insider. "We were sitting casually in his office, and Jim brought it up."
Cray - a Seattle-based company with a 47-year legacy going back to the early days of supercomputers - makes powerful machines used to take on the world's toughest problems, including predicting the weather, managing nuclear stockpile and conducting high-level medical analyses.
Ungaro was an odd choice for the job. At the time, he'd been with the company for only two years. He loved supercomputers and was good at selling them, but he was a sales guy in a company of engineers.
For Ungaro, the offer was also intimidating for another reason: The tech market had just crashed in the wake of the dot-com bust, and Cray itself was struggling.
"The company was in a pretty precarious position financially," he said. "I didn't want to become the CEO and then the company falls apart on me months later."
But he took the job, and Ungaro went on to lead Cray for the next 14 years, becoming one of the longest serving tech CEOs today, who led the supercomputer maker through a changing tech landscape.
Ungaro and his team have been on a roll recently. Over the past few months, Cray has unveiled plans to build three new supercomputers, each one more powerful than any of the top 100 supercomputers currently in existence today.
But here's the ironic twist in those big wins: Cray will no longer be an autonomous company when those three supercomputers start operating. Cray is set to become part of Hewlett Packard
The pending merger could give HPE access to the technological firepower it needs to boost its bid for a stronger position in the enterprise cloud computing market.
Buying Cray also means HPE will soon be joined by one of the most experienced executives in the high-performance computing market. Ungaro will give up the CEO post at some point in the near future to become a senior vice president at HPE's high-performance computing business, too.
Unusual career path
His new role marks a new chapter in what has been an unusual career path.
For one thing, Ungaro essentially stumbled upon a tech career. The son of Canadian parents, he grew up in Spokane, Washington and studied business at the Washington State University.
He wasn't really into computers in college, he said, but when IBM visited his campus to interview potential recruits, Ungaro saw an opportunity to launch a career in sales. There was just one problem: the IBM visitors were interested in engineers, not sales people.
Ungaro worked around that with a bit of deception.
"I stole my roommates' interview with IBM," Ungaro told Business Insider. Well, he didn't really steal it. He convinced his roommate, who was studying to be an engineer but who wasn't interested in working for IBM, to get him the interview using his resume.
Ungaro immediately fessed up to his background once he met with the IBM recruiter. "The interviewer got a pretty big kick out of that, that I had the guts to do that," he said. "I think they liked my tenacity and that was probably they hired me."
Ungaro joined IBM as a salesman in 1991. He eventually was assigned to an area that he grew to enjoy: Selling supercomputers to national laboratories and the large government institutions that use them. In 2003, now well into his career, Ungaro accepted an offer to join Cray, then known for its supercomputing prowess.
"I really loved the world of supercomputing and I just felt that being in a company where 100% of the company was focused on that one thing would be incredibly exciting and energizing," he said.
'I was practically the only non-engineer in the company at the time'
Cray's workforce was composed mostly of engineers. That made Ungaro stand out. "It was an engineering company at its core," he said. "They were all engineers. Even the sales leaders were ex-engineers. I was practically the only non-engineer in the company at the time."
He also joined Cray during a turbulent time in tech.
Founded in 1972, Cray became a leading maker of supercomputers in the 70s and 80s, building powerful machines for government and research institutions in the US and other countries.
It later faced stiff with the rise of other high performance computer makers. One of them, Silicon Graphics, acquired Cray in 1996. But that merger didn't work out, and Cray re-emerged as a separate company in 2000.
By then, the dot-com boom was turning into a bust and Cray itself was struggling financially. That was when Ungaro got the nod to take over.
'Kind of a surreal moment'
Ungaro said at first he didn't think it was a good idea. "It was kind of a surreal moment. I had never thought of being a CEO. I was still pretty young and I felt that I still had lots to learn."
Even his wife was incredulous, Ungaro said. When he told her about the offer, she asked if Rottsolk, who had become a family friend, had been drinking. "She was a little skeptical," he quipped.
But it was a serious offer which Ungaro eventually accepted.
He knew that he had one important strength: at 35, he already had more than a decade of experience selling supercomputers. "I had really good knowledge of the customers and the market," he said. "I had been on the sales side for so long."
Chirag Dekate, an analyst with Gartner, affirmed this point. Ungaro became successful because of his "incredible sales acumen" which helped "sustain the company through a difficult period," he told Business Insider.
Earl Joseph, CEO of Hyperion Research, which focuses on the high performance computing market and who had also worked at Cray, pointed to another strength: Ungaro's ability to work and engage with Cray's engineers.
"He showed them a high level of respect and friendliness, and worked very close with them," he told Business Insider. "That's why he was unique. … I have to tell you, Peter has done an unbelievable job turning the company around."
The HPE acquisition
Ungaro said the company had been "on a really good path." But it also became clear to him that Cray combining with HPE "could be a powerful partnership."
It is certainly not because Cray has become a weaker player in the supercomputing market, analyst Joseph of Hyperion said. Cray is being sold at a time when it had reached a high point, said Joseph. "They are winning left and right," he said. "It's very much a high point."
In fact, Cray was seen as a heavy-hitter when it comes to government and publicly-funded supercomputing projects where it routinely beat HPE. A big chunk of Cray's revenue, about 80%, comes from government contracts, and only one-fifth is from commercial deals.
HPE CEO Antonio Neri actually highlighted that point when the merger deal was announced, noting that HPE gets only one-third of its revenue from government contracts. The merger, he said, would mean "we can both win."
This was underscored by the back-to-back supercomputing deals Cray recently announced, each worth $600 million each. In May, Cray unveiled the Frontier project, with AMD and the Department of Energy, which will be used for sophisticated simulation and analyses in various fields, including weather, genomics and physics. It is scheduled to start operating in 2021.
In August, Cray announced the El Capital supercomputer project for managing the nation's nuclear stockpile. The contract is with the Department of Energy, the Lawrence Livermore National Laboratory and the National Nuclear Security Administration. It will be completed in 2022.
But while Cray is currently clearly well-positioned to win many more major deals, that may become tougher in the future as the cost of building supercomputers which could become more challenging for a company of Cray's size, Joseph said.
"To really to play in that game, they have to be part of a larger concern," Joseph said.
While Cray routinely wins hefty supercomputing contracts, its footprint in a key enterprise tech market is small. It's only the seventh biggest player in the $14 billion high-performance computing server market, with 2.3% of the market, according to Hyperion Research. That market is dominated by HPE with 34.8%, followed by Dell with 20.8% and IBM with 7%.
The analysts also broadly agreed that having Cray on its side could help HPE bolster its offering in cloud computing, a market where rivals like Amazon Web Services, Microsoft, and Google dominate.
End of the line
Still, Ungaro admitted that presiding over the end of Cray's iconic run as a standalone supercomputing company has been an emotional experience.
"I lost a lot of sleep over the last few months thinking about it," he said. "The technology, I believe in it so much I really want to make sure that it has a good home going forward."
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