It's a new direction for AMD, one it hopes will allow it to expand its server business and capitalize on the fast-growing cloud computing market. Spending on servers for such "scale out data centers" is expected to grow 33 percent a year on average for the next several years, AMD said, faster than the server market as a whole.
The move puts AMD in the difficult position of competing with some of its customers, though Lu insisted that will not be a problem. The scale of SeaMicro's business today is much smaller than that of a Hewlett-Packard or a Dell, she said, and AMD thinks the value of SeaMicro's technology to server vendors will outweigh their competitive concerns.
AMD's server business could use a lift, noted Dean McCarron, principal analyst at Mercury Research. "They are obviously experiencing a decline and this would be a way to expand the market for their processors," he said.
AMD is paying $281 million in cash for SeaMicro and the remainder in stock, Lu said. It expects to close the deal in March.