AMD to buy 'microserver' maker

AMD has revealed plans to buy Silicon Valley startup SeaMicro for $US334 million to gain a foothold in smaller, lower-power computer servers.

AMD's first major acquisition under new CEO Rory Read, who replaced the ousted Dirk Meyer, is aimed at the microserver market, where relatively lightweight -- and hence lower-power -- computers host Web services including multimedia streaming.

The company hopes to market SeaMicro's servers, which it says consume a quarter of the power and take up a sixth the space of a typical server that comprises the massive "farms" that corporations now maintain, to AMD's corporate parters: HP, Dell and IBM.

"A microserver with a very low footprint ... is what the cloud market is looking for," AMD director of product marketing John Fruehe said in a brief telephone interview.

The rapid adoption of cloud computing -- where data and applications are stored on or hosted on remote computers via the Interent -- is driving worldwide server demand.

SeaMicro just last month announced its first servers powered by AMD arch-rival Intel would be available on the market. It's unclear how the proposed acquisition will affect that partnership.

Experts say microservers might become popular with smaller companies -- such as Internet startups -- that are both conserving capital while eschewing the need for the raw processing power of today's computer servers. SeaMicro's customers include Mozilla, Skype and eHarmony.

But Fruehe said SeaMicro also has the capability to go mainstream and its servers can be scaled-out to accommodate more intensive tasks.

AMD will be footing $US281 million of cash from its reserves for SeaMicro, which is backed by Khosla Ventures, Draper Fisher Jurvetson, Crosslink Capital, among other investors.

The acquisition, which is expected to close in about 30 days, will not change the company's 2012 guidance but will begin affecting earnings after this year.

(Reporting by Edwin Chan; Editing by Bernard Orr)