HPE acquires SGI for $275 million in high performance computing play

SGI's business has stagnated in recent years, but HPE reckons the company can add high performance computing and big data products to its mix.

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Hewlett Packard Enterprise said that it will acquire SGI in a deal valued at $275 million.

The deal, which equates to about $7.75 a share in cash for SGI, is aimed at bolstering HPE's position in the big data and high performance computing (HPC) markets. Shares of SGI closed at $5.98 on Thursday.

SGI has become a HPC-focused company with about $553 million in revenue for fiscal 2016. SGI also has 1,100 employees globally and primarily focuses on scientific, technical, and government verticals.

According to HPE, SGI will complement its datacenter, HPC, and big data businesses. SGI sold servers, storage, and software for HPC implementations.

The initial plan is to combine product portfolios as well as go-to-market strategies. HPE said the deal will be neutral to earnings a year after the deal closes and accretive after that. The deal is expected to close in HPE's first fiscal quarter.

SGI's business has been rattled in recent years. The company reported fiscal 2012 sales of $753 billion and $767.2 million in 2013, before tanking to $529.9 million in fiscal 2014. SGI also lost money in fiscal 2014 and 2015, but it's expected to post a small profit in 2016 on a non-GAAP basis. SGI also reported its fourth quarter results. The company reported a non-GAAP profit of 8 cents a share on revenue of $123 million, down from $153 million for the previous year. SGI lost $11 million for fiscal 2016.

The HPE acquisition ends a turbulent history for SGI. SGI was founded in 1981 and made its name on 3D graphics workstations. By the mid-1990s Intel and Microsoft powered systems took workloads in the 3D market. In 2009, SGI restructured in bankruptcy and was sold to Rackable Systems, which took the SGI name.

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