AMD said late Wednesday that it’s buying microserver start-up SeaMicro for $334 million. It means to pay $281 million in out-of-pocket cash and the remaining $53 million in its disrespected stock.
If memory serves, AMD hasn’t bought much of anything since it impoverished itself buying Canadian graphics chipmaker ATI Technologies for $5.4 billion back in 2006. It’s certainly the first major acquisition since AMD CEO Rory Read joined the company last summer.
The acquisition is supposed to be a strategic investment in the type of dense, low-power, high-bandwidth platform attractive to the cloud set and spook agencies these days. And that’s an itch ARM also means to scratch.
The sweet irony of the situation is that the only gear SeaMicro is currently selling is based exclusively on Intel parts, to wit the low-power Atom chip, and just recently a low-power Sandy Bridge Xeon processor, which lets it run heavyweight widgetry like Hadoop, real-time analytics, Java apps, PHP, Memcached and NoSQL in addition to webby stuff.
However, the industry’s newest couple says it’ll have an AMD Opteron-based model of SeaMicro’s widgetry out in the second half.
They didn’t identify the chip they mean to use, but it could be the upcoming one-socket processor code-named Delhi with four to eight cores that was the only future chip that fits the SeaMicro timeframe to be clearly targeted at microserver use on a recent roadmap Read gave Wall Street.
It would then appear that Intel, which calculates that microservers will represent 10% of the overall server market by 2016, has lost its sole microserver champion in the move.
CEO Andrew Feldman says that SeaMicro, which will be run as a free-standing unit, will continue to support its Intel line for the life of the chips it’s using, which he said was another two years. Intel in turn said two years is a long time and that another Intel flag carrier was bound to turn up.
Be that as it may Feldman said the conversation with Intel was “hard” without giving up any of the doubtlessly juicy details.
Among other things Intel hasn’t been able to break ARM’s vise-like grip on the lucrative low-power mobile market and by the end of the year the ARM contingent should have samples of four-core 64-bit silicon that’ll give it a leg up in the server and desktop market. Intel, meanwhile, will have a next-generation Atom.
AMD has also appeared to be leaning toward adopting the AMD chip, which SeaMicro rival Calxeda has developed into a quad-core 32-bit Server-on-a-Chip (SoC) that HP means to sell in its own so-called Redstone microservers for which it has set elaborate plans in train.
John Fruehe, director of product marketing for server products at AMD, acknowledged that AMD might eventually graft an x86 chip and an AMD chip together onto the same SeaMicro SoC. It also has its ATI-derived GPUs to play with, he said. There could also be plain vanilla ARM boxes.
See, SeaMicro’s so-called supercompute fabric, which connects thousands of processor cores, memory, storage and input/output traffic, supports multiple processor instruction sets.
AMD said the acquisition will accelerate its disruptive server strategy so it can stake out a “data center leadership position.”
One of the move’s disruptive features is the fact that for the first time AMD will be competing with its own customers while at the same time hoping to turn them into SeaMicro OEMs pushing the widgetry into the cloud data centers that IDC projects will be the fastest-growing segment of the server market through 2015.
Supposedly HP was supportive when notified of the acquisition. Guess we’ll see.
Feldman, who will become general manager of a new AMD Data Center Server Solutions business reporting to Lisa Su, AMD’s new general manager of global business units, said SeaMicro and AMD spent hundreds of hours in engineering discussions across many weeks and when AMD decided to pull the pin its footwork getting the deal together was “dazzling.” There were reportedly other unidentified contenders for the start-up not all of them chipmakers.
Feldman feels SeaMicro and AMD share the same lust “to change the whole server market.”
Otherwise SeaMicro, which got to this point on $60 million in venture capital, gets access to new markets, resources, technology and scale out of the deal.
AMD said the acquisition doesn’t change its 2012 financial guidance and it expects the transaction to be accretive to earnings sometime after 2012. The deal should close in the next few weeks.