In Jab At Intel, Advanced Micro Agrees To Buy SeaMicro For $334 Million

AMD CEO Rory Read, SeaMicro CEO Andrew Feldman, and Lisa Su, general manager of AMD global business units.

Jamming a stick in the eye of rival Intel, Advanced Micro Devices said Wednesday it has agreed to buy micro-server vendor and Intel customer SeaMicro in a deal worth $334 million.

SeaMicro has attacked the server market with a design that pairs Intel processors with custom chips that let the eighty-employee company put processor and memory onto a board the size of a credit card. The result: SeaMicro can cram 512 Intel Atom processor cores into a box no bigger than a dorm-room fridge.

It’s an approach Intel managers said could grab as much as 10% of the server market when SeaMicro unveiled a new server design last month. The SM10000-XE is built around Intel’s Xeon server processors and Samsung’s memory chips.

The Sunnyvale, Calif.-based startup has targeted companies with intensive computing needs, including intelligence agencies, financial companies, and web companies. SeaMicro’s more than 50 customers include eHarmony, Skype, and Mozilla.

The acquisition is the first major deal for AMD Chief Executive Rory Read, who joined the company in August. Read has emphasized ‘execution’ at a company plagued with technology glitches, including manufacturing problems that caused AMD to miss a chance to get its processors into Apple’s hot-selling MacBook Air, former employees say (see “After Years Of Hard Knocks, AMD Honing Its Killer Instinct“).

Wednesday’s announcement puts AMD in the awkward position of competing with some of its customers with products built using a competitor’s processors. In a statement, AMD said it remains “firmly committed,” to SeaMicro’s server business. But AMD will also offer SeaMicro’s technology to server vendors who use AMD’s products, said Lisa Su, general manager for AMD’s global business units. “We’re looking for ways  to really change the game,” Su told a group of reporters at AMD’s Sunnyvale, Calif. offices.

While AMD announced plans to incorporate its Opteron server processor into SeaMicro’s designs by the second half of 2012, over time AMD could pair a wide array of processors with SeaMicro’s technology. Last month, AMD Chief Technology Officer Mark Papermaster unveiled an “ambidextrous” strategy that will allow AMD to mix its own graphics and processor designs with intellectual property owned by other companies. “This is a server building block, this is a technology building block, it provides a very significant capability to our own customers,” Papermaster said Wednesday.

While snapping up SeaMicro is sure to cause consternation at Intel, new competitors are threatening to move from building processors for smart phones to building chips for more sophisticated tasks. Late last year UK processor design house ARM, whose licensees include Samsung, Apple, Qualcomm, Texas Instruments, and Nvidia, detailed plans to attack the server market with a new processor architecture, dubbed ARMv8, able to gulp down 64-bits of data at a time.

Last year, AMD and Intel customer Hewlett-Packard announced a partnership with Calxeda, which is designing ARM-based server processors. And Samsung has recruited former AMD processor designer Keith Hawkins to work on its own effort to build server chips, former AMD employees say.

At the same time, AMD’s customers are facing a squeeze, with some major customers ordering custom servers directly from overseas contract manufacturers. “What we could do is enable our OEM [original equipment manufacturer] customers to deliver something that is profoundly different  so that their customers could not cut them out and go directly to an ODM,” said SeaMicro Chief Executive Andrew Feldman.

Feldman acknowledged there were “multiple other bidders,” for Sea Micro, not all of them semiconductor companies. Feldman will become general manager of the data center servers and solutions business at AMD, reporting to Lisa Su. SeaMicro’s 80 employees will join AMD. AMD plans to close the SeaMicro deal in March.

AMD will play $334 million for Sea Micro, including $281 million in cash. SeaMicro investors include Draper Fisher Jurvetson, Khosla Ventures and Crosslink Capital. It has also received a $9.3 million grant from the U.S. Department of Energy.

Source: Forbes