Contingencies Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Note 11— Contingencies

A customer experienced significant reliability issues with a high-value third-party component in its Cray system after several years of use. The Company has worked with both the third-party vendor and the impacted customer and agreed upon a solution with all parties. The Company incurred $2.5 million and $3.0 million in the three and nine months ended September 30, 2016, respectively, and believes that it has resolved this matter.

The Company is subject to patent lawsuits brought by the Raytheon Company (“Raytheon”). The first suit was brought by Raytheon on September 25, 2015 in the Eastern District of Texas (Civil Action No. 2:15-cv-1554) asserting infringement of four patents owned by Raytheon. Two of the asserted patents relate to computer hardware alleged to be encompassed by Cray’s current and past products, and two of the asserted patents relate to features alleged to be performed by third party software that Cray optionally includes as part of its product offerings. A second suit was brought by Raytheon on April 22, 2016 in the Eastern District of Texas (Civil Action No. 2:16-cv-423) asserting infringement of five patents owned by Raytheon. In the second suit, all five of the patents relate to features alleged to be performed by third party software that Cray optionally includes as part of its product offerings. Trial in the first action is currently scheduled to commence in March 2017 and trial in the second action is currently scheduled to commence in October 2017. The Company is vigorously defending these actions. The probable outcome of this litigation cannot be determined, nor can we estimate a range of potential loss. Based on its review of the matters to date, the Company believes it has valid defenses and claims.  As a result, the Company considers the likelihood of a material loss related to these matters to be remote.