Huppenthal
`
`Reference 4
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 1
`
`

`

`DRAFT
`
`6/12/96
`
`TO:
`
`Jon Huppenihal
`
`FROM:
`
`Seymour Cray
`
`RE:
`
`Employment in Newcorp
`
`I am offering you employment with my new company effective July
`
`1, 1996 or a start date at your convenience, if you would prefer to take
`
`some time off. I am personally committing to you a guarantee of two
`
`years of employment at a stalling salary of
`
`per year. Because
`
`the company is just beginning (I expect incorporation by August 1, 1996),
`
`we would provide an additional supplement of
`
`n month until a
`
`reasonable fringe benefit package becomes available for all employees of
`
`the new company.
`
`Your duties and responsibilities would center around your role as
`
`the Head of Electrical and Mechanical Engineering in the design and
`
`development of our new computer product line. In that capacity you
`
`would report to Terry Willkom and be expected to work closely with
`
`myself and the software group as we develop the technical parameters for
`
`a low cost supercomputer using commodity parts and current technology.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 2
`
`

`

`Newcray Computer Business Plan
`
`•• The New Company
`
`Newcray Computer Corporation ("Newcray") is a new privately owned company being formed to
`build and support high performance scientific computer systems. This company is an outgrowth of
`Cray Computer Corporation which is a public company currently in bankruptcy. Newcray plans to
`rehire a significant portion of the management and technical staff of Cray Computer to begin operation
`of the new company. Basic changes will be made in the type of product manufactured as described
`below. The market, however, is the same market addressed by the public company.
`
`•• Current Status of Cray Computer
`
`Cray Computer is currently being reorganized under Chapter 11 of the Bankruptcy Code. The
`company voluntarily filed for bankruptcy protection in March of 1995. Operations of the company
`were terminated at that time and all but a few management employees have left the company and are
`currently employed elsewhere. The company has operated as a debtor in possession from that date to
`the current date. No trustee or examiner has been appointed by the court. The company has filed a
`plan of reorganization which essentially liquidates all of the assets. The company believes the creditors
`will be paid nearly all of their claims but there will be no funds remaining to be distributed to
`shareholders.
`
`•• History of Public Company
`
`Cray Computer was incorporated in 1989 as a spin off of Cray Research, Inc. Cray Research has
`been in the business of building large scientific computers since 1972. At the time of the spin off,
`Cray Research had two product lines which were competing in the same market. The management
`decided to separate the product lines and distribute stock to shareholders for the two separate ventures.
`Seymour Cray, the founder of Cray Research, then left the parent company and began Cray Computer
`with the product line called Cray-3. This was the product line with the most advanced technology and
`with the greatest risk.
`
`•• Reason for Public Company Failure
`
`Cray Computer between 1989 and 1995 produced the Cray-3 and Cray-4 computer systems. These
`machines were technically successful but were not economically competitive in the market place.
`Technical development delays caused the Cray-3 to be two years late to the market. The Cray-4, an
`evolutionary improvement to the Cray-3, was available at a time when the market for large scientific
`computers was in confusion because of new product introductions and numerous company failures.
`No potential customer for the Cray-4 computer would risk the large capital investment in this uncertain
`environment.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 3
`
`

`

`Newer ay Computer Business Plan
`
`Page 2
`
`•• Changes in Scientific Marketplace
`
`During the period 1990 to 1995 the market for large scientific computers was traumatized by the
`introduction of very capable work stations and Massively Parallel Processor (MPP) configurations.
`The products of Cray Research and Cray Computer typically sold for $10,000,000. Work stations
`appeared in this time frame which were perhaps 10% as capable but sold for $200,000. Some
`traditional "Cray" customers chose to buy many smaller work stations rather than single large systems.
`
`A second confusion factor in this time frame was the introduction of MPP systems. These systems
`used mass produced microprocessors in large numbers rather than the custom vector processors in
`Cray Research or Cray Computer systems. These new MPP systems had some serious programming
`problems to coordinate many small processors to do the work of one fast processor. The U.S.
`government perceived that these MPP systems would be the machines of the future. The government
`funded many MPP research facilities which would otherwise not have been cost effective. This
`distorted the market place for several years.
`
`In 1994 the government reversed course and withdrew support for MPP systems as a part of general
`government cost reduction. This resulted in a wave of MPP company failures and chaos in the
`facilities that had participated in the government programs. In this environment all large computer
`facility managers were reluctant to buy any large computer product.
`
`•• Scientific Marketplace Today
`
`Today there is a backlash from the over optimism of the MPP systems. Some progress was made in
`the programming problems of MPP systems but the effort to complete this work was much greater
`than anticipated. Much damage was done to the scientific computer companies in the United States.
`Cray Computer went into bankruptcy. Cray Research became financially too weak to survive alone
`and was acquired by Silicon Graphics. Convex Computer was acquired by Hewlett Packard for the
`same reason. Almost all of the MPP companies have gone out of business.
`
`Today the best selling large scientific computers are Japanese. Fujitsu and Nippon Electric Company
`(NEC) are dominating the vector machine market world wide. There is divided opinion as to whether
`MPP systems will come of age without the U.S. government support. The strong showing of the
`U.S. computer industry is in the work station market. The question is how to configure these work
`stations to best solve the large scientific problems. This is the area addressed by the emerging private
`Newcray Computer Corporation.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 4
`
`

`

`Newcray Computer Business Plan
`
`Page 3
`
`•• Shared Memory vs Distributed
`
`There are two major approaches in using microprocessor work stations in "clusters" to solve large
`scientific problems. In the distributed approach each microprocessor (node) has its own memory.
`Communication between microprocessor nodes is generally between neighbors in two or three
`dimensions. There is a "grid" of processor nodes. This is the cheapest approach but has
`programming problems if the application requires a lot of memory access over the entire memory
`structure.
`
`The second approach has all of the processors sharing a common memory. This requires cross bar
`switches (like a telephone system) to connect any processor to any memory bank. There is additional
`cost in the cross bar switches. There is a programming advantage in that any processor can address
`the entire memory of the cluster of work stations. This has not been practical for very large systems to
`date because microprocessors have had only 32 bits of address. This is changing because 64 bit
`processors are becoming available in 1997. This second approach is the one to be used by Newcray
`Computer Corporation.
`
`•• The New Company Product
`
`The initial Newcray product (NC7) is narrowly focused on the large scientific market using new
`generation work stations with a common memory. It will use a microprocessor which is the next
`generation product from Intel Corp. This microprocessor will follow the "Pentium Pro" which is the
`current volume product for personal computers and work stations. The microprocessor to be used in
`the NC7 has a 64 bit structure and has the computing capability of the Cray-4 custom processor at a
`small fraction of the cost. This same processor will be used in personal computers and small work
`stations in the 1998 to 2000 time frame.
`
`The NC7 memory will use the next generation of mass produced synchronous dynamic random access
`memory parts (SDRAM). These parts are not used today in personal computers or work stations but
`all major suppliers of these products are planning the conversion to SDRAM parts in the next few
`years. These parts are currently available in 16 megabit chips from a number of memory suppliers.
`This size part will be used in early NC7 systems. A design upgrade to 64 megabit parts will occur in
`later versions of the system.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 5
`
`

`

`Newcray Computer Business Plan
`
`Page 4
`
`•• Change in Product Strategy
`
`The Cray-4 system, which was the last product developed by the public company, was an elegant high
`technology masterpiece. It required all custom components which could not be purchased outside of
`Cray Computer. The company had vertically integrated all of the special equipment necessary to make
`this product. The small volume production and proprietary character of this product priced it out of the
`rapidly collapsing market for large systems.
`
`The NC7 system proposed for the new private company is strategically the reverse approach. The
`components will be off-the-shelf high volume production items in general usage during the later part of
`the product life. The uniqueness of the product will depend on the configuration of the system design
`rather than the components themselves. This approach will result in the lowest possible cost to
`manufacture and will require a small Newcray work force to assemble.
`
`•• Com?non Memory System
`
`The NC7 system will implement a very large common memory structure. This has not been possible
`with commodity microprocessors in the past because they were not designed for addressing large
`memories. The Intel processor which will be available in 1997 is the first commodity product which
`seems appropriate for this function.
`
`Cray Research machines were leaders in large common memory structures. This allowed Cray
`Research to dominate the large scientific computer market for two decades. Other companies have
`been slow to adopt this approach because they lacked the technical expertise and did not understand the
`importance of common memory to the large scientific user.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 6
`
`

`

`Newcray Computer Business Plan
`
`Page 5
`
`•• The NC7 Building Block
`
`The NC7 is a modular system constructed of building block cabinets. Each cabinet contains 32
`processors and 16 gigabytes (GB) of SDRAM memory. A single cabinet will be equivalent in
`performance to a large system from Cray Research or NEC today but at a fraction of the cost. Each
`cabinet occupies a 2 feet by 3 feet floor area and is five feet tall. The equipment in the cabinet is air
`cooled and dissipates 8000 watts of electric power. A similar sized cabinet may house disk arrays and
`interface equipment to consoles and remote communication paths.
`
`The NC7 modular cabinets can be interconnected in a cluster to expand the size of the system to a
`maximum of 16 cabinets. A maximum system would contain 512 processors and 256GB of SDRAM
`memory. This system would have a maximum computation rate of one TeraFLOP (trillion floating
`point operations per second). There will be two unique features in this system. One is the low price
`of the product. The other is the ability of each processor to directly address all 256GB of memory
`data.
`
`•• Product Price Point
`
`The NC7 modular cabinet is expected to be priced at less than $2,000,000. This compares with
`today's price of $7,000,000 for an NEC machine and $20,000,000 for a Cray Research machine.
`These comparison machines have the same memory size and computation capability. We expect these
`competitive machines to be reduced in price during the next two years but not to the level of the
`Newcray product.
`
`*• Development Time scale
`
`The NC7 development cycle is expected to be 20 months. The pacing item is the availability of the
`microprocessor from Intel. The crossbar switching circuits are the only area where the company needs
`to order special electrical parts. Packaging of the components in the modular cabinet involves standard
`readily available components.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 7
`
`

`

`Newcray Computer Business Plan
`
`Page 6
`
`•• Expected Market Size
`
`The company expects the market for the NC7 computer in the 1998 time frame to be approximately
`$500 million dollars per year. This has been the size of the large scientific market for several years and
`is projected to be flat in the short term. This will change for the better if, and when, the U.S.
`government begins buying large systems again. The current market is largely outside of the United
`States and the greatest growth is in Japan. We expect explosive growth in scientific computing in
`China and the Pacific rim countries over the next few years.
`
`The NC7 should sell well in this market because of the low cost and compatibility with the Intel based
`work stations. The first order of business for the company is establishing credibility in the market
`place with a small number of well placed systems. We have explored the interest in several such
`facilities and expect to have orders for systems before the product development is complete. There is
`world-wide concern about the demise of the U.S. computer companies and dependency on Japanese
`systems from Fujitsu and NEC. Our company plans to take advantage of this emotional aspect of
`marketing.
`
`•• Software for NC7 Systems
`
`Software for computers is currently undergoing a dramatic change as a result of all of the incompatible
`operating systems and applications of the recent past. All of the major equipment suppliers are cross
`licensing each other's operating systems. As a result we will soon be able to run most any operating
`system on any major hardware platform.
`
`The Intel processor used in the NC7 system is program compatible with the "Pentium" and "Pentium
`Pro" processors. All of the programs available for these current systems will run on the NC7
`processor as a stand alone system. Newcray needs to modify the operating systems to address the
`large memory and to allow multiple processors to work together in the common memory. This is a
`significant effort for a small company but is modest compared to the problems of building a custom
`processor machine.
`
`There are two operating systems which the company expects to be most popular in the 1998 time
`frame. These are the UNIX system and the Windows NT system. The company plans to make the
`necessary modifications to these two systems to allow customers of the NC7 hardware platform to run
`large scientific codes in a multiprocessor mode.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 8
`
`

`

`Newcray Computer Business Plan
`
`Page 7
`
`•• Relationship with ITS Corporation
`
`The company plans to use Intertrade Scientific, Inc. (ITS) for marketing the NC7 product in Europe
`and Asia. We perceive these markets to be leading the United States in scientific computer purchases
`at the present time. Early orders will come from these areas. The ITS corporation currently markets
`equipment for integrated circuit foundries. The president of this company, Robert Levy, was
`previously the head of Cray Research marketing for Europe. He would like to expand the product
`range of ITS corporation and get back into his previous profession. The ITS corporation will provide
`financial support for Newcray as required during the initial phases of private ownership until the other
`sources of capital are in place.
`
`•• Relationship with Hewlett Packard
`
`The company is planning a technology transfer agreement with the Hewlett Packard company. This
`agreement is of interest to our company because of the production expertise present in H/P. The Cray
`Computer background has all been in special manufacturing techniques out of the current main stream
`process. It will be most helpful to have access to the large volume production knowledge of the H/P
`people. There is a further advantage in that H/P is expecting to use the same microprocessor from Intel
`as we will use in the NC7. The two companies do not see a competitive conflict in that the Newcray
`computer market is very small and is for systems larger than those planned by Hewlett Packard.
`
`This agreement is of interest to Hewlett Packard because the common memory bandwidth design
`issues so successfully exploited by Cray Research and Cray Computer are not common knowledge
`within H/P. Our company will provide progress reports to H/P and share the technology in this
`narrow area of current concern at that company. Hewlett Packard plans to provide funding to
`Newcray over a three year period to support the startup of our company in return for the technical
`information they will obtain.
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 9
`
`

`

`Newcray Computer Business Plan
`
`Page 9
`
`•• Initial Financing
`
`Our plan is to raise between $15,000,000 and $20,000,000 of capital to fund the startup of Newcray
`Computer Corporation. This funding should be adequate to carry the company through the
`development stage and into initial production of the NC7 systems. Seymour Cray and Jim Guzy are
`planning to participate in this financing with $3,000,000 to $5,000,000 each. Additional funding is
`expected from another strategic partner and customer advances, bringing the total funding to between
`$15,000,000 and $20,000,000.
`
`•• Facilities and Personnel
`
`Newcray plans to assemble the NC7 systems in Colorado Springs, Colorado. This was the location of
`the public company and most of the personnel to be carried over from the public company are located
`there. A new physical facility will be required and this can initially be much smaller than that occupied
`by the public company. No special facility requirements are needed beyond office space except for a
`somewhat larger than normal power capability.
`
`Personnel required for the development phase are scheduled below. This schedule does not include
`the migration of the 60 people in Paragon maintenance.
`
`Job type
`
`96Q3 96Q4 97Q1 97Q2 97Q3 97Q4 98Q1 98Q2 98Q3 98Q4
`
`Management
`Hardware
`Software
`Production
`Clerical
`
`4
`4
`2
`1
`1
`
`4
`4
`2
`1
`1
`
`5
`4
`4
`2
`2
`
`5
`6
`4
`2
`2
`
`6
`6
`4
`4
`3
`
`6
`8
`4
`6
`3
`
`Total
`
`12
`
`12
`
`17
`
`19
`
`23
`
`27
`
`8
`8
`6
`10
`4
`
`36
`
`8
`8
`6
`15
`4
`
`41
`
`10
`8
`6
`20
`4
`
`48
`
`10
`8
`6
`20
`4
`
`48
`
`•• Equipment Delivery Schedule
`
`The following delivery schedule is based on cabinet units of NC7 systems.
`
`96Q3 96Q4 97Q1 97Q2 97Q3 97Q4 98Q1 98Q2 98Q3 98Q4
`-----
`1
`4
`8
`12
`
`PATENT OWNER DIRECTSTREAM, LLC
`EX. 2105, p. 10
`
`