The AMD-SeaMicro Cloud Server Deal: A Closer Look

When AMD announced plans to buy SeaMicro for $334 million, Wall Street initially applauded the deal. But how will the AMD-SeaMicro potentially impact the cloud computing market?

In his initial statement about the deal, AMD CEO Rory Read claimed a beachhead in the data center arena:

Trumpeting the two companies’ strengths, Read said that the acquisition “…uniquely positions AMD with a compelling, differentiated position to attack the fastest growing segment of the server market.” Prior to talking the helm at AMD in August 2011, Read was COO at Lenovo for five years.

Commenting on the deal, SeaMicro CEO Andrew Feldman said:

Under the agreement, which the companies expect will be finalized in March 2011, Feldman will become general manager of AMD’s new Data Center Server Solutions division.

SeaMicro will continue to sell its hardware with Intel processors until the end of this year, according to Lisa Su, general manager for AMD’s products division, at which time they plan to release SeaMicro servers with AMD Opteron processors.

That integration sets up a channel conflict, although both Su and CEO Read downplay the potential consequences. Dell, HP and IBM all manufacture energy-efficient micro servers and compete with SeaMicro. When AMD begins placing its own chips in upcoming versions of SeaMicro hardware, there’s a chance rival server makers may decide not to put ADM’s microprocessors in their own equipment.

Su believes that the technology boost to purchasers of SeaMicro servers will mollify concerns over competition. Reed was blunt on the issue: “We will not compete with our customers.”

It remains to be seen how big players like HP and Dell will react to potential conflicts down the road. For now, the market is nodding its approval of the deal.

On an interesting side note, which speaks to the emphasis AMD places on the burgeoning cloud computing market, the company acknowledged that it paid a premium for SeaMicro in order to fend off competitive buyers.

Longer term, Talkin’ Cloud will be watching to see how channel partners and cloud services providers (CSPs) react to the AMD-SeaMicro deal.