Total gross profit margin for the first quarter was 24 percent compared to 43 percent in the first quarter of 2008. As anticipated, product margin declined to 22 percent driven by a large, low-margin contract (on which $36 million was recognized in the first quarter of 2009). The first quarter 2009 service margin of 32 percent was impacted by a delay in the signing of a contract and revenue recognition issues relating to a custom engineering project on which we have been incurring costs.
Operating expenses for the first quarter of 2009 were $21.4 million compared to $22.8 million in the prior year period. The first quarter 2009 results included non-cash items of $2.2 million for gross depreciation and amortization and $2.4 million related to stock compensation expense, which includes approximately $1.4 million in accelerated amortization related to the stock option tender offer completed in the first quarter of 2009. Additionally, interest expense included $0.5 million of non-cash interest expense related to the adoption of a new accounting principle.
As of March 31, 2009, cash and short-term investments totaled $131.8 million and net cash was a record $104.1 million (cash and short-term investments less the face value of outstanding convertible notes of $27.7 million). Net cash at Dec. 31, 2008 was $52.7 million.
"We had a solid first quarter marked by strong revenue performance and excellent growth in our cash position," said Peter Ungaro, president and CEO of Cray. "With the hiring of Skip Richardson to lead our Custom Engineering business development team and the recent announcement of the XT5m, our new midrange supercomputer, we now have the pieces in place to deliver on our long-term strategic vision. We have more than doubled our addressable market in the last 18 months and, with the momentum created by the Cray XT5 supercomputer, we will continue to expand our position in the high performance computing industry."
Outlook
For the full-year 2009, a wide range of potential outcomes remain possible. Cray continues to expect revenue in the range of $260 million for the year with a small operating loss. Overall gross profit margin is expected to be in the low to mid-30 percent range, much improved from first quarter levels. Core operating expenses are anticipated to be lower by roughly $2 million from 2008 levels. We currently anticipate the balance of the annual revenue target to be weighted relatively evenly by quarter through the remainder of 2009, though results could fluctuate significantly depending on the timing of system acceptances.