Total gross profit margin for the second quarter 2011 was 38% compared to 39% for the second quarter of 2010. For the second quarter 2011, product margin was 34% and service margin was 48%. Second quarter 2011 service margin benefited from strong maintenance margin and revenue on a Custom Engineering contract on which costs were recognized in a prior period.
Operating expenses for the second quarter of 2011 were $28.7 million compared to $17.6 million in the second quarter of 2010. In the prior year quarter, operating expenses benefited from $12 million in research and development (R&D) co-funding credits related to the completion of a Defense Advanced Research Projects Agency (DARPA) milestone. Second quarter 2011 results included non-cash items of $2.1 million for depreciation and amortization and $1.0 million related to stock compensation expense.
Revenue for the six-month period ended June 30, 2011 was $107.8 million compared to $57.1 million in the prior year period. For the first half of the year, total operating expenses were $46.7 million compared to $35.9 million in the prior year period. The higher operating expenses were almost entirely due to less R&D co-funding credits. Net loss was ($4.4 million) or ($0.13) per share for the first half of 2011 compared to a net loss of ($18.2 million) or ($0.53) per share in the prior year period. The first half of 2011 results included non-cash items of $4.3 million for depreciation and amortization and $2.1 million related to stock compensation expense.
As of June 30, 2011, cash balances totaled $135.6 million.
"We had a solid quarter, with revenue up substantially year over year and strong gross profit margins", stated Peter Ungaro, president and CEO of Cray. "We are getting great market feedback on our latest products and I'm particularly excited about our new hybrid supercomputer, the Cray XK6, which will be the first general-purpose supercomputer that allows users to harness the capability of GPUs to run real-world applications faster than ever before. In addition to a planned processor upgrade for our high-end systems, we continue to make good progress on our product roadmap and expect to release new Custom Engineering offerings late this year. While we have a lot of work left to do, we are confident in our prospects for the rest of the year and remain focused on our long term goals of growth and sustained profitability."
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 now anticipated to be more than $60 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 third quarter revenue in the range of $35 million and fourth quarter revenue likely representing more than 50% of the annual total.
For the year, total gross margins are expected to be in the mid-30% range. With a second $12 million DARPA milestone anticipated for the fourth quarter, total operating expenses for 2011 are expected to be approximately $100-$105 million, including restructuring expenses related to the company's workforce rebalancing announced in March 2011. 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.
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