Total gross profit margin for the first quarter 2011 was 43% compared to 23% for the first quarter of 2010. For the first quarter 2011, product margin was 32% and service margin was 51%. First quarter 2011 service margin benefited as new, large systems went into production and also benefited from revenue on a custom engineering contract on which costs were recognized in a prior period.
Operating expenses for the first quarter 2011 were $18.1 million, flat with the prior year period. First quarter 2011 operating expenses included $1.1 million for restructuring costs associated with the company's workforce rebalancing announced in March 2011. The first quarter 2011 results also included non-cash items of $2.2 million for depreciation and amortization and $1.1 million related to stock compensation expense.
As of March 31, 2011, cash balances totaled $125.9 million compared to $61.3 million as of December 31, 2010.
"We had a solid first quarter highlighted by strong gross margin and cash of over $3 per share at quarter-end", stated Peter Ungaro, president and CEO of Cray. "We continue to make good progress on our internal development plans with two upgrades planned for the Cray XE6 supercomputer later this year. Due to lengthening sales cycles, mainly driven by federal budgeting delays in the U.S. and abroad, we have adjusted the low end of our revenue range downward for 2011 - at the same time we reduced our cost profile and improved our operating leverage. Our focus is on winning new opportunities needed to achieve our outlook while continuing to execute on our longer-term growth drivers."
A wide range of results remains possible for 2011 and the company's quarterly and annual results are highly dependent on completing a handful of large transactions already contracted as well as securing additional opportunities. One of these opportunities not yet contracted is anticipated to be more than $50 million in revenue for 2011. Assuming all necessary acceptances are achieved within the year, total revenue for 2011 is anticipated to be $300-$340 million. Quarterly revenue is expected to fluctuate for 2011 with second quarter revenue in the range of $65-$70 million and fourth quarter revenue representing more than 50% of the annual total. Custom Engineering revenue is expected to be approximately $40-$50 million for 2011.
For the year, total gross margins are expected to be in the mid-30% range and with a second Defense Advanced Research Projects Agency (DARPA) milestone anticipated for the fourth quarter, core operating expenses are expected to be about $100 million. Based on this outlook, we expect to be profitable for 2011.
Actual results for any future period are subject to large fluctuations given the nature of Cray's business.
Recent highlights include the following: