supercomputer business january 11, 1985 rtpf' · pdf filewith regard to supercomputer...
TRANSCRIPT
I5345Y* ' DRAFT #2 - F
PRESENTATION TOM^CBOARD OF DIRECTORS
SUPERCOMPUTER BUSINESS
JANUARY 11, 1985 rtpf'R. M. PRICE ^ ^ \J /
0"INTRODUCTION
[PASS OUT OVERVIEW OUTLINE - REVIEW IT AND PLANS FOR DISCUSSING
THE TOPICS OVER THE COURSE OF THIS YEAR'S BOARD MEETINGS]
THE FIRST TOPIC I'LL COVER IN THESE DISCUSSIONS IS THE SUBJECT
OF SUPERCOMPUTERS, THE MARKET AND TECHNOLOGY RISKS, AND AN
OVERALL ASSESSMENT AND OUTLOOK FOR ETA. IN THIS DISCUSSION, AS
IN SOME OF THE OTHERS, WE WILL ALSO DISCUSS THE FINANCING
IMPLICATIONS OF OUR PROJECTS AND PROGRAMS.
THE MOST SIGNIFICANT FACT — IN FACT, PROBABLY THE ONLY ONE —
WITH REGARD TO SUPERCOMPUTER DEVELOPMENT AND MARKETING TO
REMEMBER IS THAT IT IS HIGH RISK -- VERY HIGH RISK. CONTROL
DATA HAS PERSISTED AND BEEN SUCCESSFUL IN THIS MARKET AS MUCH
FOR THE REASON OF UNDERSTANDING THE DYNAMICS OF THIS WHOLE
PROCESS AS THE TECHNOLOGICAL COMPETENCE OF OUR PEOPLE. AND WE
HAVE HAD HIGHLY COMPETENT, TECHNICAL PEOPLE BECAUSE HIGH STAKES
GAMES ATTRACT SUCH PEOPLE.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 2
FOR YEARS SCIENTIFIC AND ENGINEERING COMPUTING IN GENERAL AND
SUPERCOMPUTERS IN PARTICULAR WERE LOOKED UPON AS A BACKWATER OF
THE INDUSTRY. NOW, AFTER AN HIATUS OF ALMOST TEN YEARS,
ATTENTION HAS ONCE AGAIN BEEN FOCUSED ON THIS VITAL ARENA OF
THE COMPUTING BUSINESS -- SUPERCOMPUTERS. BEGINNING WITH U.S.
GOVERNMENT OFFICIAL CONCERNS FOR THE JAPANESE NATIONAL ASSAULT
ON THE SUPERCOMPUTING MARKET IN 1982, A STRONG TIDE OF SUPPORT
FOR RESEARCH, DEVELOPMENT, AND ACQUISITION BY A WIDE VARIETY OF
END USERS HAS BECOME EVIDENT. I WON'T REPEAT IN DETAIL THE
RATIONALE FOR ESTABLISHING ETA IN 1983 AS THE VEHICLE FOR
PURSUING THE SUPERCOMPUTER PART OF OUR BUSINESS, BUT YOU WILL
RECALLD THAT IT WAS FIRST AND FOREMOST TO ESTABLISH THE
NECESSARY ENVIRONMENT FOR FUTURE SUCCESS AND SECONDLY TO
ADDRESS BOTH THE FINANCIAL AND FINANCING IMPLICATIONS OF THE
FUTURE ROUNDS OF SUPERCOMPUTER DEVELOPMENT.
NOW THAT ONE-THIRD OF ETA'S FIRST PRODUCT DEVELOPMENT HAS
ELAPSED, THE COSTS, OPPORTUNITIES, AND RISKS OF THIS VENTURE
CAN BE ASSESSED FROM A MORE CERTAIN PERSPECTIVE. I WILL DO IN
AN OVERALL CONTEXT OF THE "SUPERCOMPUTER BUSINESS."
[OVERHEAD PROJECTOR ON - TITLE SLIDE - THE SUPERCOMPUTER
BUSINESS]
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 3
TO VIEW CURRENT SUPERCOMPUTING IN PERSPECTIVE, IT IS HELPFUL TO
LOOK BACK AT THE NOT-SO-BRIEF HISTORY OF THIS RARIFIED AND
SOMEWHAT ESOTERIC SEGMENT OF THE BUSINESS. SINCE THE ENIAC
COMPUTER, THERE HAVE BEEN NUMEROUS SYSTEMS WHICH COULD BE
CLAIMED TO BE "THE FASTEST MACHINE IN TOWN" FOR A GIVEN ERA.
WE HAVE CHOSEN HERE TO LIMIT OUR DISCUSSION TO THE MOST
SIGNIFICANT DEVELOPMENTS OF COMPUTERS WHICH ASPIRED TO OR
ACHIEVED THE DISTINCTION OF BEING EXTRAORDINARILY POWERFUL FOR
THEIR TIME. IN SOME CASES, THE PUBLICITY AND FINANCIAL OUTLAYS
EXCEEDED THE PERFORMANCE GOALS, IN TERMS OF HISTORICAL
SIGNIFICANCE OF A GIVEN PROJECT.
AT THIS POINT, I SHOULD POINT OUT THAT IN BUILDING THE MOST
POWERFUL COMPUTING SYSTEM POSSIBLE FOR A GIVEN STATE OF BASIC
CIRCUIT TECHNOLOGY, THERE IS AN EXTREMELY SUBTLE AND CRITICAL
BALANCE WHICH MUST BE STRUCK BETWEEN ARCHITECTURE AND CIRCUIT
TECHNOLOGY. IN OVERSIMPLIFIED TERMS, IT IS POSSIBLE TO
CONCEIVE OF DESIGNS FOR WHICH THERE IS NO PRACTICAL POSSIBILITY
OF IMPLEMENTING IT GIVEN THE STATE OF THE ART. ON THE OTHER
HAND, TRYING TO ANTICIPATE TECHNOLOGICAL DEVELOPMENT AND
DESIGNING AROUND ANTICIPATED FUTURE DEVELOPMENTS, CAN AND HAS
LED TO AN ABSOLUTE DEAD END. THE PAST IS REPLETE WITH EXAMPLES
OF BOTH.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 4
AS SOME OF YOU KNOW, THE SUPERCOMPUTER STORY REALLY BEGINS WITH
THE PARALLEL EFFORTS OF IBM AND UNIVAC IN THE MIDDLE 1950S
WHICH YIELDED THE LARC AND STRETCH AT LIVERMORE AND
LOS ALAMOS. (THESE WERE PRECEEDED, HOWEVER, BY AN ENGLISH
DEVELOPED COMPUTER CALLED ATLAS, WHICH ANTICIPATED MANY FUTURE
DESIGN FEATURES.) ANYWAY, LARC AND STRETCH WERE SHARED RISK
DEVELOPMENTS, WITH THE GOVERNMENT CONTRACTING FOR THE
MACHINES. THE VENDOR'S RISKS WERE PRIMARILY ATTENDANT TO
AGREEING TO A FIXED PRICE AND GUARANTEE OF COMPLETION OF THE
CONTRACT. BOTH THESE EARLY PROJECTS SUFFERED FROM THE SOON TO
BE FAMILIAR PHENOMENA IN SUPERCOMPUTER DEVELOPMENT OF
UNDERESTIMATING COMPLEXITY AND TECHNOLOGICAL CHALLENGES. THE
RESULT WAS LATE DELIVERY, UNDER PERFORMANCE, AND COST
OVERRUNS. ALTHOUGH IN BOTH CASES SOMETHING WAS FINALLY
DELIVERED, BOTH ATTEMPTS CAN ONLY BE CLASSED AS FINANCIAL
DISASTERS.
[OVERHEAD - SLIDE #2 - SUPERCOMPUTER PERFORMANCE]
THE UNQUESTIONED BEGINNING OF SUPERCOMPUTERS AS A CLASS, OF
COURSE, CAME IN 19 64 WITH THE DELIVERY OF THE INITIAL CONTROL
DATA 6600 MACHINES. IT WAS IN CONNECTION WITH THIS EVENT THAT
THE TERM "SUPERCOMPUTER" FIRST CAME INTO USE. THE GREAT
SUCCESS OF THE 6600 HAS OBSCURED A CRUCIAL MATTER. IT WAS
DESIGNED TWICE. THE FIRST TIME SEYMOUR CRAY — IN TRYING TO
ANTICIPATE CIRCUIT TECHNOLOGY — DEVELOPED A FLOP. HE HAD TO
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 5
START OVER. ALSO LOST IN THE MISTS OF THE PAST IS THAT EVEN
AFTER A SUCCESSFUL DESIGN WAS COMPLETED, THE MACHINE COULDN'T
BE PRODUCED IN ANY VOLUME AND ULTIMATELY IT WAS IN EFFECT
DESIGNED A THIRD TIME. ON TOP OF THAT, ITS DESIGN
PECULIARITIES WERE SUCH THAT THE MOST COMMON COMPLAINT FOR THE
FIRST FIVE YEARS OF ITS EXISTENCE WAS THAT CUSTOMERS COULD IN
PRACTICE ONLY REALIZE 30-40 PERCENT OF ITS POTENTIAL POWER.
NEVERTHELESS, THE SUPERCOMPUTER ERA WAS LAUNCHED. THE
REALIZATION OF COMPUTATIONAL RATES IN THE "MEGAFLOP" RANGE LED
IMMEDIATELY TO DEMANDS BY THE NUCLEAR RESEARCHERS FOR EVEN
GREATER HORSEPOWER INCREASES FOR THE NEXT GENERATION. THUS,
HAVING HARDLY DIGESTED THE POTENTIAL OF THE 6600, THE
GOVERNMENT LABS SET ABOUT PLANS FOR SPECIAL PURPOSE
"MULTIPROCESSORS" AND "VECTOR PROCESSORS" TO DEAL WITH THEIR
PROBLEMS. IT WAS THIS PLANNING WHICH LED TO THE TEXAS
INSTRUMENTS "ADVANCED SCIENTIFIC COMPUTER," THE BURROUGHS
"ILLIAC IV AND THE CONTROL DATA "STAR-100" PROJECTS. THE HOPE
OF DEVELOPERS AND CUSTOMERS ALIKE WAS THAT THESE MACHINES WOULD
BE AVAILABLE AS EARLY AS 197 0-197 2. SUCH WAS NOT TO BE THE
CASE.
WITH THE ADVENT OF ITS NEW 360 COMPUTERS IN THE MIDDLE 60S, IBM
HAD ALSO ENTERED THE SUPERCOMPUTER ARENA WITH ITS
360-90 SERIES. IT WAS SUCH AN AWFUL FAILURE THAT COUPLED WITH
ILLEGAL MARKETING PRACTICES, THEY GOT THEMSELVES A LAWSUIT.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 6
MEANWHILE, SEYMOUR WAS DESIGNING A NEW MACHINE — THE 6800.
THE MACHINE WAS TO BE FOUR TIMES AS FAST AS AND A
STRAIGHTFORWARD EXTENSION OF THE 6600. IT TOO FAILED. ONCE
AGAIN WE STARTED OVER AND BY USING A DIFFERENT DESIGN --
INCOMPATIBLE WITH THE 6600 -- SUCCESS WAS ACHIEVED. THIS
COMPUTER WAS CALLED THE 7600 AND ENJOYED AN EXTRAORDINARILY
LONG RUN AS THE WORLD'S MOST POWERFUL COMPUTER.
THE REASON FOR THAT LONGEVITY WAS THAT THE TI-ASC EFFORT FAILED
AND WAS ABANDONED. THE ILLIAC-IV FAILED AND WAS ABANDONED.
THE STAR FAILED AND WAS REDESIGNED IN STAGES UNTIL FINALLY
TODAY'S CYBER 205 APPEARED.
MEANWHILE, SEYMOUR'S EFFORT TO BUILD THE FOLLOW-ON TO THE
7600 — A MACHINE TO BE CALLED THE 8600 ALSO FAILED ~ THIS
TIME, AS WITH THE 6600, IT WAS THE TECHNOLOGY SELECTION. BUT
THIS TIME THE SELECTION WAS TOO CONSERVATIVE RATHER THAN TOO
AMBITIOUS. SEYMOUR QUIT, TOOK A YEAR OFF, WENT SCUBA DIVING
AND DECIDED TO USE A DIFFERENT TECHNOLOGY. USING THE DESIGNS
DEVELOPED IN THE STAR (AS WELL AS THE 8600), HE ANNOUNCED A
"RADICALLY NEW ARCHITECTURE." WHAT WAS NEW, OF COURSE, WAS AN
LSI VERSION OF WHAT HAD BEEN DONE BEFORE AT GREAT EXPENSE.
MEANWHILE, HOWEVER, AFTER 10-12 YEARS OF EFFORT, THE "RADICAL"
VECTOR AND AS WELL AS PARALLEL PROCESSING ARCHITECTURES BEGAN
TO TAKE HOLD.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 7
WITH THE STAR-100 EXPERIENCE AS A HARDWARE AND ARCHITECTURAL
TEST-BED, THE COMPUTING COMMUNITY BEGAN TO VIGOROUSLY PUT OUT
NEW SOLUTIONS FOR VECTOR MACHINES FROM PLACES AS DIVERSE AS
WISCONSIN, JAPAN, AND NEW YORK UNIVERSITY. THE PERFORMANCE
CURVE CONTINUES UPWARD THOUGH, WITH USER DEMANDS REMAINING
APACE AND EASILY SURPASSING THE NORMAL TECHNOLOGICAL AND
MANUFACTURING CONSTRAINTS THAT EXIST IN THE "REAL" WORLD OF THE
SUPERCOMPUTING BUSINESS.
HAVING REACHED CONSTRAINTS OF PERFORMANCE THAT EVEN THE BEST
TECHNOLOGY AND VECTOR/SCALAR ENGINEERING COULD PROVIDE, THE
INDUSTRY HAS LAUNCHED INTO THE COMMERCIAL EXPLOITATION OF
"MULTIPROCESSING" WITH THE ADVENT OF THE CRAY-2 AND THE
ETA-10. THE PERFORMANCE POTENTIAL IN MARRYING THE BEST ASPECTS
OF THE CDC CYBER 205 AND MODERN MULTIPLE PROCESSOR
INTERCONNECTION CAN BE SEEN IN THE 1986 TARGET FOR PEAK RATES
OF TEN BILLION FLOATING POINT OPERATIONS PER SECOND.
I HAVE DWELT ON THIS HISTORY AT SOME LENGTH ONLY TO EMPHASIZE
THE POINT I MADE AT THE BEGINNING. SUPERCOMPUTER DEVELOPMENT
IS VERY HIGH RISK — THERE HAVE BEEN MORE FAILURES THAN
SUCCESSES. TO THIS DATE, EVERY SUCCESSFUL MACHINE EXCEPT THE
LATEST CRAY XMP MODEL (AND I CAN'T SPEAK TO THE JAPANESE
EXPERIENCE) HAS BEEN DONE TWICE BEFORE IT SUCCEEDED.
NOW, LET'S LOOK AT WHAT THAT HAS MEANT IN TERMS OF DEVELOPMENT
COSTS.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 8
[OVERHEAD - SLIDE #3 - DEVELOPMENT COSTS]
SCHEDULE DELAYS AND LIMITED SOFTWARE AVAILABILITY WERE THE
HALLMARK OF THE EARLY SUPERCOMPUTER EFFORTS. R&D COSTS WHICH
SEEMED TO SKYROCKET ADDED TO THE PUBLICIZED INFAMY OF MANY
PROJECTS. IT IS VIRTUALLY IMPOSSIBLE TO COMPUTE THE ACTUAL
EXPENDITURES FOR MOST OF THESE LARGE SCALE DEVELOPMENTS, WITH
ACCOUNTING PRACTICES AND POPULAR MYTHOLOGY GETTING IN THE WAY
OF TRUTH. FOR EXAMPLE, THE UNIVAC LARC EFFORT WAS CLAIMED TO
COST SOME $12 MILLIONS ON THE ONE HAND OR TO HAVE REQUIRED A
WRITE-OFF OF $30 MILLION ON THE OTHER. IBM, NATURALLY, NEVER
OFFICIALLY DISCLOSED THEIR INVESTMENT IN THE STRETCH, PARTLY
BECAUSE MANY ASPECTS OF THE TECHNOLOGY AND DESIGN WERE "SPUN
OFF" TO OTHER, MORE REWARDING GOVERNMENT CONTRACTS.
THE LONG BELIEF THAT THE CDC 6600 WAS DEVELOPED WITH A TEAM OF
ELVES IN WISCONSIN FOR A FEW DOLLARS A YEAR HELPED BUILD A
FRUGAL IMAGE FOR THIS COMPANY, BUT MASKS THE ACTUAL RESOURCES
NEEDED TO BRING THAT PRODUCT TO A STABLE, MANUFACTURABLE
STATUS. IN ADDITION, IF IT WERE POSSIBLE TO AGGREGATE THE
SOFTWARE INVESTMENT ATTRIBUTABLE SOLELY TO THE 6600, THE
FIGURES WOULD BE STAGGERING.
WHAT I HAVE ATTEMPTED TO DO HERE, THEREFORE, IS ESTABLISH SOME
REASONABLE R&D FIGURES REFLECTING THE COSTS TO BRING A
SUPERCOMPUTER TO THE MARKETPLACE, IN AN INITIAL BUT STABLIZED
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 9
FORM. WE HAVE CHOSEN A ROUGH $18 MILLION ESTIMATE FOR THE LARC
AND STRETCH PROGRAMS, UP TO THE POINT WHERE THOSE MACHINES WERE
INSTALLED AND MADE OPERATIONAL. THE 6600 AND 7600 FIGURES
REFLECT THE ARDEN HILLS AS WELL AS CHIPPEWA FALLS EFFORTS, AND
INCLUDE THE EARLY SOFTWARE COSTS FOR THOSE MACHINES. THE
STAR-100 AMOUNTS REPRESENT ONLY THOSE COSTS ASSOCIATED WITH THE
BIGGEST STAR MACHINE AND NOT THE STAR-65 AND ITS UNIQUE
SOFTWARE. TEXAS INSTRUMENTS AND BURROUGHS, WHEN PROBED, WOULD
PROBABLY AGREE THAT THEIR PROGRAM COSTS WERE ROUGHLY EQUIVALENT
TO THE STAR-100.
THE CRAY-1 COSTS REFLECT ACTUAL EXPENDITURES WHICH LED TO THE
CREATION OF THAT MACHINE, WHETHER SPENT BY CONTROL DATA OR CRI
DURING THE PERIOD 1970-1977. THIS IS AN IMPORTANT POINT, SINCE
MOST OF THE TECHNOLOGIES — PACKAGING, CIRCUITS, COOLING AND
POWER — IN CRAY-1 WERE DIRECT DERIVATIVES OF CDC RESEARCH
PROGRAMS.
THE ETA-10 R&D COSTS REFLECT THE EFFORT NECESSARY TO PRODUCE
AND DELIVER FOUR MACHINES BY THE END OF 1986 WITH THE RELEASE
OF ONE VERSION OF AN OPERATING SYSTEM AND COMPILER. FROM THIS
CHART, ONE WOULD GATHER THAT DEVELOPMENT COSTS WILL CONTINUE TO
RISE INEXORABLY. HOWEVER
[OVERHEAD - SLIE »4 - DEVELOPMENT COSTS (1984 $)]
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 10
WHEN ONE VIEWS THESE COSTS IN TERMS OF CONSTANT DOLLARS, HERE
WE HAVE USED 1984 AS A BASIS, A DIFFERENT PICTURE EMERGES. IN
FACT, COSTS HAVE RISEN GRADUALLY SINCE THE LARC DAYS, AND
PEAKED OUT IN THE EARLY 1970S WITH THE STAR-100. THE STAR-100
APPEARS TO BE TWICE AS COSTLY AS OTHER DEVELOPMENTS, A MATTER
WHICH IS NOT SURPRISING SINCE IT HAD BY FAR THE MOST EXTENSIVE
REDESIGN. SINCE THAT TIME, THE COMPARABLE R&D COSTS, IN
CONSTANT DOLLARS, HAS DIMINISHED SLIGHTLY. MORE SIGNIFICANTLY,
THIS REDUCTION IN TRUE R&D COSTS HAS BEEN ACCOMLISHED DURING A
PERIOD OF EXTREMELY COMPLEX TECHNOLOGICAL AND ARCHITECTURAL
TRANSITIONS, WHERE THE CAPITAL INVESTMENTS NEEDED FOR DESIGN
HAVE BECOME ASTRONOMICAL WHEN JUDGED BY PAST STANDARDS.
NOW LET'S MOVE FROM THE PRODUCT TO THE MARKET SIDE OF THINGS.
[OVERHEAD - SLIDE #5 - SUPERCOMPUTER MARKET POTENTIAL]
COUPLED WITH PERFORMANCE, SCHEDULE, AND COST RISKS, THE
MARKETPLACE POTENTIAL FOR SUPERCOMPUTERS HAS BEEN OF GREAT
CONCERN TO ALL WHO DARE VENTURE INTO THIS BUSINESS. ON THIS
SLIDE, WE SEE THE STUMBLING GROWTH OF THIS UNIQUE MARKET SINCE
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 11
THE LARC AND STRETCH WERE FIRST DELIVERED. A NUMBER OF FACTORS
HAVE BEEN RESPONSIBLE FOR RESTRAINING THIS MARKET UNTIL RECENT
TIMES. THEY INCLUDE:
0 THE HIGH COST OF THE SUPERCOMPUTER ITSELF;
0 THE LACK OF GENERALLY USEABLE SOFTWARE;
0 THE LOW LEVEL OF SUPERCOMPUTER "LITERACY;"
0 THE INSTINCT TO "BUILD" PHYSICAL EXPERIMENTS RATHER
THAN SIMULATE THEM (FOR EXAMPLE WIND TUNNELS);
0 THE MOVE TOWARD INDEPENDENT ORGANIZATIONAL USE OF
MINI COMPUTERS, RATHER THAN CENTRALIZED MACHINES;
0 UNIVERSITY EMPHASIS ON "MINI" TRAINING IN
APPLICATIONS AS WELL AS COMPUTER SCIENCE;
0 THE UNWILLINGNESS OF VENDORS TO VENTURE INTO THIS
RISKY FORM OF BUSINESS; AND
0 "COMPATIBILITY" ~ THE COST OF TRANSITION FROM ONE
ARCHITECTURE TO ANOTHER.
OF ALL THESE ISSUES, PERHAPS THE LAST ONE BECAME THE DOMINANT
FACTOR IN PRODUCING THE SUPERCOMPUTER "DOLDRUMS" OF THE
MID 70S. EVERY RESEARCHER WHO NEEDED MORE COMPUTING POWER
HOPED FOR A STRAIGHTFORWARD TECHNOLOGY SOLUTION TO THEIR
DILEMMA. IT WASN'T UNTIL RECENTLY WHEN THE CONCEPTS OF VECTOR
PROCESSING, PIONEERED BY THE STAR-100, BECAME VINDICATED BY
COMPETITIVE DEVELOPMENTS THAT THE GENERAL MARKETPLACE RESPOND
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 12
BY SERIOUSLY ENGAGING IN THE CONVERSION EFFORTS FOR PHYSICS AS
WELL AS MATHEMATICS TO UTILIZE THIS NEW GENERATION OF
SUPERCOMPUTERS. ONCE "VECTOR PROCESSING" BECAME ACCEPTABLE, IF
NOT "FASHIONABLE," TO SUPERCOMPUTER CUSTOMERS, MAJOR
INVESTMENTS IN MONEY AND CREATIVE RESOURCES BEGAN TO BE APPLIED
TO A BROAD RANGE OF PROBLEMS. THE RESULT IS THE STEADY UPTURN
IN THE NUMBERS OF SUPERCOMPUTERS BEING ACQUIRED IN THE 1980S.
AS THESE SAME CUSTOMERS HAVE BEGUN TO ACCEPT THE NOTION THAT A
COMBINATION OF VECTOR PROCESSING AND "MULTI-PROCESSING" ARE
ESSENTIAL FOR THEIR SUPERCOMPUTING NEEDS, THE MARKETPLACE WILL
BROADEN EVEN FURTHER. THAT'S THE GOOD NEWS. THE BAD NEWS IS
THE COMPETITION FOR THAT MARKET IS ALSO GREATER THAN EVER.
[OVERHEAD - SLIDE #6 - SUPERCOMPUTER MARKET POTENTIAL]
SEEN HERE ARE THE PROJECTIONS THROUGH 1990 OF THE SUPERCOMPUTER
MARKET, AS DERIVED FROM BUSINESS ANALYST ESTIMATES, IN
PARTICULAR A.D. LITTLE. SUPERIMPOSED ON THESE ESTIMATES ARE
THE PLAN PROJECTIONS FOR ETA'S SHARE OF THAT MARKET. BOTH
MARKET AND MARKET SHARE PROJECTIONS ARE HIGHLY SPECULATIVE.
[OVERHEADS - DISCUSS EVANS MEMO]^cW' ,y^- "
NOTES TO RMP REGARDING EVANS/THORNDYKE MEMOS.
\\ "POINT OUT SUMMARY IN FIRST PARAGRAPH.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 13
POINT OUT THAT 12, 18 MONTHS DELAY WOULD ACTUALLY BE
FANTASTIC. IF EVANS IS RIGHT, THAT IS TRULY ENCOURAGING,
3) GO QUICKLY OVER THE POINTS:
0 COOLING - ENVIRONMENTAL PROBLEMS
0 1.5 MICRON TECHNOLOGY IS ON THE EDGE OF PRACTICAL
TECHNOLOGY
0 DEVELOPMENT TIME UNDERESTIMATED
0 SOFTWARE
0 PRICING
0 NEED FOR HIGH PERFORMANCE DISK
0 MARKET ESTIMATE
4) LAST PAGE. BASICALLY SAYS GO AHEAD.
THE ISSUE IS NOT TO DEBATE THE CORRECTNESS OF EVAN'S OR ANYONE
ELSE'S TECHNOLOGY ASSESSMENT. THESE DEVELOPMENTS ARE, ONCE
AGAIN, HIGH RISK AND ALWAYS SUBJECT TO UNKNOWNS. DEBATING
UNKNOWNS IS A NOT VERY FRUITFUL ACTIVITY. WE ARE IN ANY EVENT
TAKING ACTION TO PROTECT — TO THE EXTENT WE CAN — THE ETA-10
AGAINST DELAYS. THE SINGLE GREATEST PROTECTION IS TO INCREASE
THE CYBER 205 CUSTOMER BASE IN 1985, 1986, AND THUS TO PROVIDE
AN EASIER POTENTIAL UPGRADE BASE FOR THE ETA-10.
[ACTIONS TO DO THIS]
[OVERHEAD - SLIDE #7 - RISKS ASSESSMENT]
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 14
ON THE BASIS OF A YEAR'S EXPERIENCE, ETA WAS ASKED FOR ITS
ASSESSMENT OF THE MAJOR RISKS ATTENDANT TO ITS BUSINESS. THIS
SLIDE SHOWS THE RELATIVE CONFIDENCE LEVELS HELD BY ETA
EXECUTIVES IN 1983 AND 1984 FOR THE MAJOR AREAS OF RISK FOR
THEIR BUSINESS. THE TALLER THE BAR, THE HIGHER THE CONFIDENCE
FOR EACH YEAR'S PERCEPTION OF RISK AREA. SINCE "PERFORMANCE"
HAS BEEN A MANDATED TARGET, IT HAS NEVER BEEN AN ISSUE OF REAL
CONCERN. THE SCHEDULE, WHICH IS THE SECOND HALF OF THE CLAIM
"TEN GIGAFLOPS IN 1986," WAS ALSO A MANDATED OBJECTIVE, BUT ONE
WHICH COULDN'T BE ASSESSED UNTIL THE ENTIRE SCOPE OF THE
PROGRAM WAS UNDERSTOOD, AS IT NOW IS IN THE 198 4 ESTIMATES.
THE TECHNOLOGY CONFIDENCE TREND IS ALSO POSITIVE.
IT'S INTERESTING TO NOTE THE TREND WITH REGARD TO FINANCING.
WHEN ETA WAS BEING FORMED IN MID-1983, HIGH TECHNOLOGY
COMPANIES WERE ABLE TO READILY ENGAGE IN A VARIETY OF FUNDING
PROGRAMS. BY THE TIME ETA WAS STAFFED AND OPERATIONAL, IN
OCTOBER OF THAT YEAR, HOWEVER, HIGHLY VISIBLE TECHNICAL
INVESTMENTS WERE FAILING. THE STC AND TRILOGY DEBACLES OF 1984
HAVE MADE THE PICTURE WORSE. THE RESULT IS THAT LTD PTSH
FINANCING FOR SUCH PROJECTS IS SIMPLY NO LONGER AVAILABLE AND A
SIGNIFICANT AMOUNT OF EFFORT IS BEING DEVOTED TO DEVELOPING
CREATIVE FINANCING ALTERNATIVES FOR ETA.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 15
IN 1984, THE CDC P&L IMPACT OF ETA WSrbtSE APPROXIMATELY
$10 MILLION AFTER-TAX, OR ABOUT 25£ PER SHARE. ETA'S
PRE-TAX EXPENSE W-ri^BE ABOUT DOUBLE THAT BUT BECAUSE CDC
STILL OWNS MORE THAN 80 PERCENT, WE GET THE TAX BENEFIT
OF ETA'S LOSSES.
FOR 1985, ETA'S P&L LOSS PRE-TAX WILL BE ABOUT
$35 MILLION PRE-TAX. CONTROL DATA'S AFTER-TAX CHARGE
WILL PROBABLY BE ABOUT $15-$18 MILLION, WHETHER OR NOT
ADDITIONAL OUTSIDE INVESTORS ARE FOUND. THE REASON CDC'S
P&L IMPACT IS THE SAME IN EITHER CASE DERIVES FROM THE
NEW TAX LAW, WHICH MARV CAN EXPLAIN (AT LEAST PARTIALLY)
IF YOU WOULD LIKE.
THE TOTAL FINANCING REQUIREMENTS THROUGH FIRST SYSTEM
DELIVERY (LATE 1986) ARE STILL ESTIMATED BY ETA AT AROUND
$100 MILLION. IN ROUND NUMBERS THAT IS ESTIMATED AS
FOLLOWS:
1984 $ 20 MILLION
1985 35 MILLION
1986 45 million
$100 MILLION
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 16
HAMBRECHT & QUIST (H&Q) TALK IN TERMS OF AN
ADDITIONAL $20 MILLION TO ALLOW FOR SCHEDULE
SLIPPAGE.
^frfr-STATE T-HftT IN TODAY'S NEW VENTURE, MARKET
ENVIRONMENT -- TO WHICH I HAVE ALREADY
REFERRED — IT IS NOT POSSIBLE TO DO A PRIVATE
EQUITY PLACEMENT (E.G. $15-$20 MILLION) AS
EARLIER PLANNED, UNLESS THERE IS SUFFICIENT
ADDITIONAL MONEY LINED UP TO SEE THE WHOLE
PROJECT THROUGH. MSlL-EBaM-4fllAT--l--HEAR--©-T-HBRW-I-SE,
<$=3Si«JR--THE.Y. ARE ..PROBASLX..RIGHT.
SO THE CURRENT PLAN IS TO SEEK CORPORATE
EQUITY/TECHNOLOGY INVESTMENTS FROM SELECTED MAJOR
CORPORATIONS A44B^*3~WT-Lir~A-SStST—i-N—DESJJSN«W"ttND
^PA-eK-AGfNtj*"7iN---A"PPRtXAC1^'TO~-Tm)SE~-TY.PES OF
ro;tj:n.tj:,al_jlny£s.tors .
if teat approach is successful to the extent of
say $2^ million, t^at, together with a\
$25 million revolving credit currently under
negotiation (with indirect cdc backing), would\ \ \
SATISFY ETAVS 1985 FUNDING REQUIREMENTS.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
PAGE 17
H&Q\ ENVISIONS THAT COINCIDENT Wl\rH THE "INITIAL'^
$25 MILLION OF CORPORATE INVESTMENTS, COMMITMENTS
FOR a\ ADDITIONAL $20 klLLION IN ROLLOW-ON
FUNDING\WOULD BE OBTAINED FROM THE "SAME SOURCES,
AND THAT TtiE $20 MILLION \rIVATE PLACEMENT WOULD
BE COMPLETED"N^T THE SAME TIME. WE HAVEN'T YET
AGREED WITH THESE LAST TWO ITEMS.
SO ALTHOUGH NOT TIED DOWN, THERE IS A REASONABLE PLAN
AND PROSPECTS FOR ETA'S FINANCING NEEDS. THE BOTTOM
LINE IS, HOWEVER, THAT CONTROL DATA IS THE FINANCIER OF
LAST RESORT. IN ANY EVENT, THE SUPERCOMPUTING BUSINESS
IS ONCE AGAIN ALIVE AND QUITE HEALTHY WITH PROMISE OF
GROWING INTO A ROBUST MID-LIFE. CONTROL DATA, WITH ITS
INVESTMENT IN AND COMMITMENT TO ETA SYSTEMS, INC., IS
PLAYING A MAJOR ROLE IN THE EXPANSION AND EXPLOITATION
OF THAT BUSINESS.
AND AS OPPOSED TO REPRESENTING A DECLINING PERCENTAGE
OF THE TOTAL COMPUTER SYSTEMS BUSINESS, THERE IS THE
POTENTIAL — ALBEIT WITH RISK -- TO NOT ONLY GROW IN
THAT REGARD BUT TO REALIZE A HEALTHY FINANCIAL RETURN
AS WELL.
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
\
ET
A'*
RIS
KF
AC
TO
RS
HfO
MO
v/f
WH
re^W
frrv
/tt
m^
LO
WC
ON
PN
NtN
CV
9R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
TOi
IROMi
S
SUBJECT)VTA
EIASYSTEMSPBWEINn HOY10kkjotim
HAMBRECHT&QUESTDfTIII-OFFlCBMEMORANDUM
DATSsOetakm31,1SS4
KenHart,consultantDr.GeorgeRossmann,J«"^«4«^^withETAmanagement.TheywereeomPWgS^ bestoftheirability.Ileftbothrespecting^*Ukmthe?<"*«£«*f^J*JJJg2PresidentThorndyke,ChiefTechnologUO&ea,Chl*|.**"••*il^i^e^nihS Kremer,andCFOWincheU.Theyere/anexperiencedgroup,veryprofelrfemi,nifniymotWateJlandworkingharda.ateam.Oneleave,aday'sraviewwithtT
performanee,atleastInUrffirsttwoyeanofproduction.ETAmanagementvia^ouslyrejectthisopinionandciteworkarounds,•Jternativesandhistorytedefendt^iirplan.However,Istandbehindmyconclusions.Mr.HartandDr.Rotsmamieeneur>
IaskedITAmanagementtorunbusinesscasesensitivityanalyses^^^JSStSSS detay/of12,ltand24monthsaswellasaslower-than-plannedminor»""""££assuming•ind11nanosecond.v.™thepr—nt7nanosecondsETActalm.teheve^similaranalysesandsaytheywillrespondtomyrevestwithinacoupleofdays.
-UJ->•r-ZZ-UJUJ
OQ
S<Oo5
Z
oo-J
<r-
<
e
r-
OLU
CD.DOCOZ
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
S'WaiN3? ViZ
)N'D01V±VD
«
3 B .S > c
• §E
• EI*
©^ %* «* «g g /po ^*s9 Is /Sss f g 4<^ > E fir*
^3
a c
r * • Ml
Is*,;-*
© • « •fig*
Ell
xoarsnsR M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
MEMORANDUM-ETAOctober31,I'MPage2
ETASVSIEMSPWPMElHO!10KWSWB
JTbevrwm2.5millionCMOSgatesforeaonprocessorwhich,with2Km«nWcontrolandthecommunionsbuffer,™™"J» iJSwrt/12milliongatesforihfirentry-l.v.1J*"*"*1* S.xrn^nrHlionjratesforthefulTs-proee-oreompl.x.ThwKanastounding8886™^^^$^*''°^"'
TO.lrmainbuildingblock*pfa^™9^j£?J^ procss.ETAIsdesigning^circuitTtodttemasks,•Jb™%™™lUtlonalaretheirslUcoi?foundry»»^~->^y'eT'™mLit ..rtaintechnologyp>Semsherea.well.For^nple,CMiOSUselfIndoartioularlyth*USmicronCMOSprocess,areMWth.toejMng!dr.^n«TtavM^iuehftrldwhaveunexpectedP'«««??-~h•* tjrorionllatfageiate.,aUaffaetingyieldandperfermtae..IE£vfuJStTfnwchVobUm.wiUaffectETATh.~9~> KiSlIndaWoparandproduceri>afurtherimpediment.ITAarguestheyonlyneedMOOoftheir18,000gat.array.hips;1TorS.irThr.rPrototyp«TandfirstthreeproductionquadsystemsIn1»M, 1^piloTuiescanmeettheirearlydemands,thusgivingthemmere^.TJolv.technologyproblems.IdouMthja-nd«*£»• sariesofproblems,certainlyaffectingeoatandselwdule,andpeaeroiydesignandperformance.
\zV)
C3«-
-<tu
<5
Bm
oUJ
CDD(0
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
3. To deliver three production systems by the end of 1936 as they nowplan I believe ETA should have at least one development system wellalong in test by this time. Unfortunately, they have only rudimentarytests of memory and gate array chips under way. They will not evenhave their planned technology test vehicle in operation until mW~19S5. ETA is depending upon simulation anjTcite prior sueoosoef astestimongto their plan. Yet I believe tj*t, with the problems theywill cneountor4nthe eold environmental *eU ** variations etwees,production unitsT^thev will be jn^a long cycle ©C redesign andreverifieation. Thus7^the4r "pyitem test* status Is m Impertasitindieation to me that their^he4ule will not be met.
4. Under ETA's plan, theif^systems programming will not be qualifieduntil mid-1987. WMn their plan is a m\as other complex functional control .subcontracts, such as compilers and external shele>*$iey estimate thecontrol codelSTA is committed to produce at 1§§,©®0 lines. They arestill writingthe functional specifications and do net hav>sufficientdetailedycode analyses yet, nor have they affixed contingencies ontheir cooe estimates. From my experience, the complex multiplyenvironments their system will address will require a lot more code inthe operating system. I expect the software will be several monthslater than they now plan.
ETA counts upon friendly users taking lit! and early-1987 systemswith less performance and unqualified software. I concede they eanprobably find a few "friends" who will take the systems in an
V o •z.
oO i-I .<<
< :o <
|V|
OUJ
CDD0)
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
V
MEMORANDUM-ETAOctober31,1984Page3
ETASYSTEMSPROPRICT/nor10BEttFIHUCED
5.
6.
uncompletedstate,butIdonotbelievetheywillfndjmfficiantuser,tosupportthevolumeproductiontheyplan.I^X^t.s?ed environmentbythattimewillgenerallyrequire™tu^andRestedsystemswithmorecomprehensivesoftware9UWry™™T**J*\ numberof^ojnpetitorswhowillhavefullysupport,maturesystemstooffer,albeitaTsomewhatlessperformance^
IamconcernedabouttheiT^iftess^fortheytellustheirmarkupis3xcost!Thisisalmosta^o^no^levels«nd,giventheleadingedgetechnologyand^^V^'^^^ indeed.Thus,Iworryabout^fteirbusinessviabiltjTshojildeo«tsescapecontrol.
Thevdonothaveadisksubsystemtosupportthe400Mb/secbandwidthrequii^nt.Rather,theyinitiallydependmultiplexing9$b/secCDCHydra^fel^l?j»k^ht1Ch^i1e^s expensivejtfidcomplexsubsystemandcouldaffectsystemsperformanceinsomeapplicationareas.
They/areinvestigatingaDOD-fundedresearcheffortat^RCAinvolvinganopticaldiscwithmagneticbiaswhich"UnirtblyisreWwrite.However,fromtheirdescriptionoftheeffortIdoubtitsviabilityandavailabilityintheETAtimeframe.
Thus,ETA'sdisksubsystemisweakandsophisticatedusersaregoingtoseesomedifficultiesinthrough-putperformancewhichwilllikelytempervolumes.
0
upon"
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
V
7. A.D. Little is ETA's market forecast source. This study predictsexponential growth 1985 - 1990. From my knowledge, I doubt boththe volumes predicted and ETA'a-penetration ability. For example,worldwide predicted 1987 volume4s 100 units with approximately «5of these to U.S. users. ETA's/plan is 17 systems selling only in theU.S.Jthus they estimate 259^enetration in 1917 in the faoe of Cray,the Japanes^r*BMjnd others.
I believe the projected volum^es^^e somewhat high and ETA'spenetration plans>re risky, even iftftewk^ardware were ready involume and software was qualified, which IBei&ve will not be thecase.
On the point of the/100°K environment, ETA worries about this as ©potential majorproblem. Mr. Thorndyke's view is that, if the cold environment does presen>pcoblemsrequiring significant redesign, he could ship his equipment for room temperfefcireoperation, thu/suffering a 2x reduction in processor performance. ETA believes thiswould be adequate for the short term.
Given the likely competition I am unconvinced and furthermore believe that ETA ha.not made sufficient analyses of the business consequences should their speed fall soshort.
<:
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
! V
I
MEMORANDUM - ETAOctober 31,1984Page 4 /
tw systems rmsMNOI
Mr. Thorndyke also has in mind a reduced performance/reduced price systemextractable frpjnJkhjejGJ^^ however, this is unfunded and requires moreETA planning before it is ready for seTitros~ana&ies.
My viewpoint is that ^ambrecht o: Quist would be unwise to accept- thepresent ETAschedules. However, it the ETA sensitivity analyses show there still is a vTaMe-busjnessand Mr. McGettigan'and his colleagues can develop a strategy to fairly market toprospective investors on the basis of the likely schedule delays, then perhaps a way canbe found to proceed with the proposed underwriting.
cc: Jeff Can inBill Hambrecht
Ken HartDuane KirkpatrickCharles McGcttiganDean Woodman
m
r-
OUJ
CDDif)
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
L
ETA S1STEWS, INCORPORATEDInteroffice Memorandum
DATE:
TO:
FROM:
SUbJ
Foil
1.
November 20, 196K
Board of Directors
L. M. Thorndyke
bob Evans Wemo 10/31/6**
2.
owing .re the responses to Evans/' eajor concerns
The 100°K «kviron»ent - thetests at ETA\nor in literatiReport state* that semi chi~change with no, damage. Weriak bow.
iip stress has not been noted ine. Also, a recent SRC Researchtake a large temperature rate ofnot consider this a significant
We expect thatlearning from tchanges in theaponse time inunable to projebe.
Minor processing adjujvoltage) to "opperformance advantation". Vendor priand it is deeded u«eet desired objec
the redesi/gn suggested as a delay will be viaie Test Vehicle and will incorporate these design
irst uniis. His point is the engineering re-Bh would be long, however, 1 believe he iswhat a/small, dynamic company's response would
tments are required (primarily threshold" CMOS operation at 100UK. Thein/izeis outweighed by the required "customize-
ng is sensitive to process customizatiorcessary for ETA Systems to customize tc5.
The number of &«¥«»semi devices do net faiaemi area oi chi^p. T1250 chips, *-128 is
larger than cited but from experienc<due to the number of gates per die buigross number of ALS1-20K for 2-6K i<
$86 chips, and 6-256 is 3158 chipslow numbi
CPU.
compared to the Cray 1 of 225,00These are veryaemi devices pe]
True, the 1.5duction but renicron ana involume in 19]*icron or les
icron technology is at the leading edge of proearchers have\emonstr.ted VLSI device£ t>€low„ 1'VHS1C are aimi\g at .5 micron. We need modes5 and today knoV of 13 people productizing 1.
^»-«n ft- lese The corrosion\etc, are clearly solved to mak51* «IRAK aW256K DRAK thus we\ don't understand the probletill?ALSI-2& has"only one-fourtk the number of transistors pechio as these memories. The number of chips used in the «-12?•iftftl thus'only 6,000 are needed for three systems includinsoa-es t We don't believe that number is significant. ThCYBER 205, for example, uses 6500 LSI-166 chips per CPU.
SUBJECT CATALOG r
3M CENTER,
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>
v
5.
6.
The tlijf between * cJev el opment tiodel and production is one ofludgment and experience- Kr. Evans doe* not buy simulation norlow volume products. He cited that lfcH designed the TCK o! the308* for 1? years to production as the reason we have too shorta time. Ajain, we *r* not IbK nor Willi he market tolerate suchan approach. /
The software \lines of code are reasonable and our phaseddevelopment plvan allows for milestones to be measured andcorrections inserted if required. Th£ Apollo terminals and extracompiles/day possible is a significant programmer efficiencyenhancement that\i& not accepted M' him,
Kr. Evans agrees that a few friendly customers will buy earlymachines. The supercomputer industry is exactly that environment. Apparently He feels that/our compatible machine does notget any credit for upgrade marketing with current users. ternem-ber over HO CYBER 2Q$'s will eyist by the end of 1985 ell upwardcompatible.
The markup allows for\accounting structurethe same costs as our
The disk subsystem wewill be supercomputerthis area at all in fonformance subsystem.
701 GP/business. We do not have the sa&es IBK Ahus their markups are not based on
fford is identical to Cray's thus ito^petitive. He is not experienced in
sting lower volume due to lower per-
7. The market success is jiour optimism. /
^mental and we have many reasons for
The other areas of lower performance, loaner CPU's to be shipped incase the 100°K CPU's are n<j>t available was misunderstood. Mr. Evanspresumes that the 100°K problems ^are unsolvable thus must stay withair cooled. We don't pl^/n it that\way. Those air units should belooked on as loaner and Replaced w\ien 100°K problems are solved (ifthey exist); thus extra/income on \the upgrade. We will sell thelower performance as a product too.
Kr. Evans does not uaeriously suggest si
erstand
ing clockthe S\emi-manufacturing process tcto ^il^ns due to process problems.
A true lower perforthe initial checkouairf thus the discand will not be for/aduring the ETA10 checkout
L. K. Thorndyke
LKT359:b
nee machine will\be available asprocedure.
sed backup.while. tee
though.
aresultof
The Entire system is operated irThe productization is not funded
will establish product feasibility
SUBJECT sJarwwr CATALOG
3M CENTER
R M Price CDC speeches Charles Babbage Institute <www.cbi.umn.edu>