AMD to Acquire SeaMicro: Accelerates Disruptive Server Strategy

SeaMicro Low-Power, High-Bandwidth Microserver Solutions Set the Stage for AMD’s Disruptive Approach To Lead Fast-Growing Cloud Data Center Market

SUNNYVALE, Calif. -2/29/2012
AMD (NYSE: AMD) today announced it has signed a definitive agreement to acquire SeaMicro, a pioneer in energy-efficient, high-bandwidth microservers, for approximately $334 million, of which approximately $281 million will be paid in cash. Through the acquisition of SeaMicro, AMD will be accelerating its strategy to deliver disruptive server technology to its OEM customers serving cloud-centric data centers. With SeaMicro’s fabric technology and system-level design capabilities, AMD will be uniquely positioned to offer industry-leading server building blocks tuned for the fastest-growing workloads such as dynamic web content, social networking, search and video.

AMD’s server technology combined with SeaMicro technology provides customers with a range of processor choices and platforms that can help significantly reduce data center complexity, cost and energy consumption while improving performance. AMD plans to offer the first AMD Opteronâ„¢ processor-based solutions that combine AMD and SeaMicro technology in the second half of 2012. The company remains firmly committed to its traditional server business, and will continue to focus and invest in this area.

“By acquiring SeaMicro, we are accelerating AMD’s transformation into an agile, disruptive innovator capable of staking a data center leadership position,” said Rory Read, president and CEO, AMD. “SeaMicro is a pioneer in low-power server technology. The unmatched combination of AMD’s processing capabilities, SeaMicro’s system and fabric technology, and our ambidextrous technology approach uniquely positions AMD with a compelling, differentiated position to attack the fastest growing segment of the server market.”

SeaMicro technologies offer substantial advantages in large data center and cloud environments. Cloud data centers are projected to be the fastest growing segment of the server market through 2015, according to IDC1.

Current systems featuring SeaMicro technology typically use one quarter the power and take one sixth the space of traditional servers with the same compute performance, yet deliver up to 12 times the bandwidth per core2.

Foremost among SeaMicro’s innovations is their supercompute fabric, which connects thousands of processor cores, memory, storage and input/output traffic. SeaMicro’s fabric supports multiple processor instruction sets. SeaMicro solutions are currently deployed in multiple sites across the world. AMD will continue to support all current SeaMicro customers while accelerating plans to deliver new platforms that combine AMD and SeaMicro technology and enable AMD’s OEM partners to bring differentiated solutions to market.

“Cloud computing has brought a sea change to the data center–dramatically altering the economics of compute by changing the workload and optimal characteristics of a server,” said Andrew Feldman, SeaMicro CEO, who will become general manager of AMD’s newly created Data Center Server Solutions business. “SeaMicro was founded to dramatically reduce the power consumed by servers, while increasing compute density and bandwidth. By becoming a part of AMD, we will have access to new markets, resources, technology, and scale that will provide us with the opportunity to work tightly with our OEM partners as we fundamentally change the server market.”

The acquisition does not change AMD’s 2012 financial guidance and the transaction is expected to be accretive to earnings after 2012. AMD will fund the cash portion of the acquisition with existing cash reserves.

Traditional Netbooks are minimalist, typically sub-$350 laptops that average about 3 pounds and feature Intel’s power-frugal Atom processors. But the specially designated category of Netbooks is fading as more companies and consumers gravitate to plain old small laptops, minus the Netbook nomenclature and minus Intel’s Atom. And, as many analysts are saying of late, the surge of consumer interest in tablets, like Apple’s iPad, is also causing problems for the Netbook.

AMD told me this week it “sold out” of the Fusion processor in its most recent fiscal quarter. “Demand far exceeded supply,” Raymond Dumbeck, product marketing manager for AMD’s mobile products, said in a phone interview.

In further conversations with AMD this week, I was told it has delivered about 5 million Fusion chips since their introduction in the fourth quarter of 2010, and that the total includes somewhere between 3.5 million and 4 million in the most recent (first) quarter. And this number will undoubtedly increase when AMD discloses more numbers at the end of the current quarter. This is enough to dent Atom shipments, since the first-quarter Fusion number cited above comprises more than half the average number of Atom processors shipped per quarter.

“There is a significant interest in Fusion, especially the Llano parts that have yet to be released,” said Jim McGregor, an analyst at In-Stat. Which means more un-Netbooks like Sony’s 11.6-inch Y series–very deliberately not labeled as a Netbook. And Sony has made it clear it’s not interested in the category anymore.

So, is Fusion that much better than Atom? Let’s put it this way: Though AMD’s Fusion processors don’t clobber comparable Atom chips in benchmarks, Fusion offers enough of a performance cushion over Atom for PC makers like Sony, Hewlett-Packard, and Lenovo to create new designs. Sony and HP, among others, are using Fusion in 11.6-inch designs that are designated simply as small laptops. (See CNET review of HP Pavilion dm1Z with commentary about AMD’s Fusion chip performance vis-a-vis Atom.)

Not surprisingly, Intel disagrees about the demise of Netbooks–though in a phone interview Friday, the chipmaker’s marketing chief said tablets are having some impact. “It is fair to say that if people have discretionary income and they’re going to spend 500 or 600 dollars, it’s a tablet today [which] could have been a Netbook a year ago. So, there’s no question there’s a substitution that could be happening there,” said Tom Kilroy, a senior vice president and general manager at Intel’s Sales and Marketing Group.

And a couple of final thoughts about Netbooks: Apple is also doing its part to diminish the format. Though there’s a gaping price difference between, let’s say, a $300 Atom-based 10-inch Netbook and a $999 11.6-inch MacBook Air, Apple offers consumers a clearly superior choice to a Netbook.

And let’s not forget the Chromebook, a dark horse in all of this. These small (11- and 12-inch) Google Chrome OS-based laptops, due in June, are powered by Intel’s latest dual-core Atom processors. Atom’s performance characteristics are better suited to the Chrome OS than Microsoft’s resource- and performance-intensive Windows 7, which runs (slowly) on all Netbooks today.