AMD ends its ultra-dense server experiment

Three years after buying SeaMicro, it's shutting the division down.

As part of its quarterly earnings announcement on Thursday, AMD announced it is shutting down its ultra-dense server systems business, formed three years ago with the acquisition of SeaMicro, effective immediately.

AMD bought SeaMicro for $334 million. SeaMicro launched in 2010 with a 10U server that packed a large number of Atom processors into the unit. The premise was that the server could do simple tasks, like serving up Web pages, instead of bigger, more power-hungry Xeon servers.

The company will take a $75 million charge for the write-down of assets. A company spokesman told me the company is holding on to the IP but is out of the business. Before making this decision, AMD considered all options, including sale of the business but chose to shut it down because "we felt was best given dynamics in the industry and the nature of the business."

That pretty much means there is very little business for ultra-dense servers.

"There's a market, but the market didn't grow the way grow the way everybody expected it to," said Dean McCarron, president of Mercury Research. "There are users out there but from a percentage of the installed base of who would want it is really small. There's not enough to warrant being in the business. The major server vendors have a single product line but not a big focus."

A lot of people thought that market would grow, including Intel, but it never got beyond around 100,000 units quarter.

Ultra-dense servers were meant to be a cheaper alternative to Xeons in certain work scenarios, like serving up Web pages. SeaMicro's selling point when it launched in 2010, using Atom processors in its servers, was that you didn't need a big, powerful Xeon for Web pages, file and print serving or other low-end tasks. An Atom would be enough, the company argued.

Well, it turns out that the Xeon was the undoing of the SeaMicro server. "With virtualization, you can load so many [virtual] servers on a Xeon that the power per server is lower than using a low-end part like SeaMicro," said McCarron. So companies would simply load up a large number of virtual machines on a powerful Xeon server and they proved more efficient than a SeaMicro server.

The news came as part of AMD's first quarter financial results. The company saw revenue fall 26% from the same quarter last year to $1.03 billion, and its net loss grew to $180 million.

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