8-K

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 8-K

                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

       Date of Report (Date of earliest event reported): December 15, 2000


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                                    CRAY INC.
             (Exact name of registrant as specified in its charter)
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           Washington                     0-26820                 93-0962605
(State or other jurisdiction of         (Commission            (I.R.S. Employer
 incorporation or organization)         File Number)          Identification No.)



                        411 First Avenue South, Suite 600
                             Seattle, WA 98104-2860
                    (Address of principal executive offices)



Registrant's telephone number, including area code:              (206) 701-2000

Registrant's facsimile number, including area code:              (206) 701-2500



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ITEM 5. OTHER EVENTS.

1. The Company has received $12,500,000 from two institutional investors, Strong
River Investments, Inc., and Montrose Investments Ltd. in return for promissory
notes in the aggregate principal amount of $12,500,000. The notes bear interest
at the rate of 6% per annum. Each Investor has an equal interest in the notes
and the transaction.

        The Company has agreed to pay the principal and interest on the notes by
issuing shares of common stock to the Investors and to apply the purchase price
for the shares against repayment of the principal of and interest on the notes.
Through December 2000 the Company has repaid $4,200,000 of the notes by
delivering a total of 1,671,094 shares of common stock to the Investors at an
average price of $2.51 per share. The purchase price for these sales was 92% of
the daily volume weighted average trading price of the common stock over the
thirty-five trading days comprising the period of the sales.

        The Company has agreed to repay the $8,300,000 remaining notes by
issuing additional shares of common stock to the Investors at a price equal to
91% of the average of the daily volume weighted average market price for the
common stock over the sixty-four trading days comprising the period of the sales
(the "Purchase Price"), which will be completed by the end of March 2001.

        The Investors have the option of purchasing an aggregate of $2,500,000
shares of common stock at the Purchase Price. The option is exercisable at the
end of the sale period.

        The Company may prepay the notes at any time and terminate the
obligation to sell shares of the common stock. To do so, the Company may either
increase the amount of the prepayment by 10% or must deliver warrants to the
Investors covering shares of common stock equal to 20% of the amount of the
prepayment divided by the average of the closing bid prices for the common stock
for the five trading days immediately before the prepayment (the "Average
Price"). The exercise price would be 130% of the Average Price. The warrants
would have a standard cashless exercise provision.

        The Company is selling the shares of common stock under its Registration
Statement on Form S-3 (No. 333-46092), as supplemented, directly to the
Investors in a privately-negotiated transaction in which no party is acting as
an underwriter. The Company has agreed to pay Intellect Capital Ltd. a placement
fee equal to 7% of the equity raised from this transaction. Terren S. Peizer,
one of the Company's directors, is an affiliate of Intellect Capital Ltd.



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             The Company hereby files as Exhibit 5 to the Registration Statement
a legal opinion regarding the validity of the shares sold to the Investors.

2. On December 21, 2000, Terren S. Peizer resigned as Chairman of the Board of
Directors of the Company, and James E. Rottsolk was elected Chairman. Mr. Peizer
remains a director of the Company.

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.


(c)     Exhibits

        5.1 Opinion of Kenneth W. Johnson, General Counsel, on the legality of
        the shares.

        23. Consent of Kenneth W. Johnson (included as part of his opinion filed
        as Exhibit 5.1).






                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

                                      CRAY INC.


                                      By: /s/ JAMES E. ROTTSOLK
                                            James E. Rottsolk
                                            President
January 3, 2001



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                                 EXHIBIT INDEX





Exhibit
 Number        Description
 ------        -----------
            
   5.1         Opinion of Kenneth W. Johnson, General Counsel, on the legality
               of the shares.

   23.         Consent of Kenneth W. Johnson (included as part of his opinion
               filed as Exhibit 5.1).

EX-5.1

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                                                                     Exhibit 5.1

                                                                 January 3, 2001

The Board of Directors of
Cray Inc.

Dear Sirs:

I refer to my opinion dated September 29, 2000, and included as Exhibit 5 to
Amendment No. 1 to the Registration Statement on Form S-3 (Commission File No.
333-46092) (the "Registration Statement") filed on September 29, 2000 by Cray
Inc. (the "Company"), a Washington corporation, with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). I am rendering this supplemental opinion in connection with
the prospectus supplement (the "Prospectus Supplement") to the base prospectus
(the "Base Prospectus") filed on or about January 4, 2001, by the Company with
the Commission pursuant to Rule 424 under the Securities Act. The Prospectus
Supplement relates to the sale by the Company of 1,671,094 shares of the
Company's Common Stock, $0.01 par value per share (the "Shares"), which Shares
are covered by the Registration Statement. The Shares were offered and sold in
the manner described in the Prospectus Supplement and Base Prospectus.

I have acted as your counsel in connection with the preparation of the
Registration Statement, the Prospectus Supplement and the Base Prospectus. I am
familiar with the proceedings of the Board of Directors of the Company in
connection with the authorization, issuance and sale of the Shares. I have
examined such other documents as I consider necessary to render this opinion.

Based upon the foregoing, I am of the opinion that the Shares have been duly
authorized and, are validly issued, fully paid and non-assessable.

I hereby consent to the filing of this opinion as a part of the Registration
Statement and to the reference to me under the caption "Legal Matters" in the
Base Prospectus.

                                      Very truly yours,

                                      Kenneth W. Johnson. Esq.
                                      General Counsel