Advanced Micro Devices has agreed to buy a hot Silicon Valley start-up that powers the likes of Google and Facebook. A.M.D. wants to build its profile against Intel as the chip supplier to the world’s biggest computer centers.
A.M.D. said it would pay $334 million, including $281 million in cash, for SeaMicro, which makes energy efficient “microservers” currently sold largely to intelligence agencies and Web giants. SeaMicro’s products use mostly low-power chips from Intel and Samsung to carry out jobs like real-time data analysis by creating a “fabric” of multiple servers and data storage units.
A.M.D. plans to keep the company separate once the deal closes in March, buying others’ chips on the open market and also incorporating into SeaMicro’s fabric technology its higher-power Opteron processors. These new products are expected in the second half of this year, and should quickly make their way into products from A.M.D. customers like Hewlett-Packard and Dell. Adding Opteron could increase both the capabilities of SeaMicro’s technology and the customer base for it. SeaMicro says its technology works in microservers with one-quarter of the power and one-sixth of the space used by conventional machines.
It is the biggest purchase by A.M.D. since Rory P. Read came on as chief executive last August. He had previously served as president of Lenovo, the Chinese maker of personal computers and laptops. While SeaMicro’s current sales were not disclosed, A.M.D. acknowledged it paid a high price for the server maker, fending off other interested parties both inside and away from the chip business.
“This acquisition is what a technologist lives for,” said Lisa Su, senior vice president and general manager for A.M.D.’s global business units, who joined the company in January. “A.M.D. had some great technology, great intellectual property, but we had to make some bold moves.”
Continuing SeaMicro’s business means A.M.D. will offer a server that competes with H.P. and Dell servers. A.M.D. officials said that they do not expect to become a big player in servers, however. Instead, A.M.D. hopes to offer hardware manufacturers new ways to configure machines that they sell for enterprise cloud computing, a fast-growing sector of the market that uses Web computing methods for corporate needs like financial analysis and manufacturing.
Lines in the industry have blurred, however. In November, H.P. announced a server for data centers that essentially uses a low-power chip closer to the kind used in cellphones. SeaMicro’s fabric technology will compete with that. Besides battling Intel, A.M.D. needs to offer its customers an alternative to suppliers from Taiwan. These companies have in the past few years moved from assembling computers for H.P. and Dell, to offering entire racks of their own servers for giant data centers. SeaMicro’s fabric technology could offer greater data center efficiencies compared with the preconfigured systems.
“A.M.D. has been really thoughtful about how to organize this,” said Andrew Feldman, the chief executive of SeaMicro, who will report to Ms. Su once the transaction closes. Dell and H.P., he said, “see their cloud business going through the roof, the Web monsters buying servers at rates they’ve never seen before. Companies four, five and six years old are buying hundreds of millions of dollars’ worth of servers a year. It’s unheard of.”