AMD's SeaMicro purchase: All about pushing Intel out of microservers

AMD's SeaMicro purchase: All about pushing Intel out of microservers

Summary: AMD's acquisition of SeaMicro was well received, but channel conflict with partners remains a big concern.

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AMD's $334 million purchase of cloud microserver maker SeaMicro was all about nudging its way into a hot market at Intel's expense.

A day after AMD's surprising purchase of SeaMicro, analysts were largely gushing about the deal. Meanwhile, new AMD CEO Rory Read showed he's willing to make large strategic bets. The rationale for AMD goes like this:

  • AMD can put its chips into SeaMicro gear, which until today has revolved around Atom and Xeon processors from Intel.
  • The company has an outlet for its server chips and can validate AMD's power/performance technology.
  • There's channel risk since partners HP and Dell make microservers, but it's manageable.
  • AMD is looking for double-digit server market share, up from about 6 percent today. To make that jump requires a few big bets.

Read said on a conference call:

This is AMD's time, and we'll create our first list of value creation by becoming a solid execution engine and delivering on our commitments. At the same time, we will drive a second lift of value creation by positioning ourselves to capture the opportunity this market inflection point brings. That is exactly what the acquisition of SeaMicro helps us to do. We will embrace these changes in the market and seize the opportunity to step out of the shadows and lead.

For server buyers focused on dedicated cloud computing AMD's move is good news. You want AMD to be aggressive and push Intel on pricing somewhat. It's unclear whether AMD's SeaMicro bet will work, but it's a bold move that opens up a new market.

More: AMD buys SeaMicro for $334 million, makes bold strokeAMD jumpstarts their microserver business; pokes Intel in the eyeAMD Acquires SeaMicro: Big Bet on Architectural Shift

Analysts were generally impressed with the move. Here's a sampling of comments.

Oppenheimer analyst Rick Schafer said:

We like the deal and see it providing a spark to the AMD story. The AMD/SeaMicro combination presents a potential threat to Intel's server dominance while upping the competitive ante vs. fellow ARM-based server players.

Williams Financial analyst Cody Acree said:

SeaMicro should help AMD accelerate its share gains in the highly lucrative, rapidly expanding, server market. Cloud computing and data centers are driving the segments growth and low-power combined with high-performance are keys to winning market share. We expect SeaMicro’s existing customers, who are using Intel’s chips today, will shift to AMD, over time.

Barclays Capital analyst C.J. Muse said:

Challenges remain as AMD balances servicing SeaMicro’s existing customers with integrating own chips with SeaMicro. Other concerns remain around Opteron’s ability to scale <30W and competition with its own customers.

The obvious issue that looms for AMD is channel conflict. SeaMicro competes with Dell, HP and IBM. If AMD sells SeaMicro servers, it's likely that Dell and HP will think twice about using the chipmaker in its gear.

"The acquisition appears to put AMD at odds with current system level customers. If AMD decides to back away from selling servers to avoid competing with its OEM customers, SeaMicro could represent a high-priced IP acquisition," said Schafer.

Read, however, downplayed the potential conflict. "AMD is firmly committed to bringing interesting and capable, advanced technology to our customers and partners, in order to help them win in the marketplace. We will not compete with our customers," he said.

Related:

Topics: Intel, Banking, Hardware, Processors, Servers

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4 comments
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  • Loss/Loss as HP, DELL, and IBM drop AMD like a rock and go all Intel

    and as Intel procs outperform amd's at lower power all those HP, DELL, and IBM servers take SeaMicro's share down. AMD loses, SeaMicro loses, the combination double loses.
    Johnny Vegas
    • Atom isn't that much less expensive and performs worse...

      ... than the basic AMD processors. Add the fact that AMD's APU performance runs circles around any Intel integrated graphics (except in instances where performance is CPU-bound), and you have a win/win for AMD pushing visual cloud computing.
      Champ_Kind
  • AMD needs this:

    Server APU's with graphics.

    This would open up a whole world of integrated chips for RemoteFX for virtualization. Instead of needing a server with conventional discrete GPUs, just have a rack space with short-height 1P, 2P, or 4P boards with server-validated Llano/Trinity-series APU's or better, and multimedia-heavy RemoteFX virtualization scenarios becomes a killer feature for AMD.

    Imagine the server density that you could achieve for remote sessions with full D3D/GPU-compute acceleration for professional media/graphics apps....
    Joe_Raby
  • Intel makes server platforms too

    Seemingly lost among the AMD doom-and-gloomers is that Intel is into server platforms also. And not in a small way. So the prediction that the OEMs currently
    using AMD will go to Intel is ridiculous. AMD is the 50 lb chimpanzee in this room.
    rosanlo