Hewlett Packard Enterprise is buying supercomputer maker SGI for $275 million in a bid to grow its capabilities in such areas as data analytics, high-performance computing and the cloud.
The deal, announced Aug. 11, will bring HPE a range of systems—including SGI’s UV in-memory supercomputers and ICE distributed memory systems—that will complement its own portfolio of high-end servers and make it a larger player in an $11 billion high-performance computing (HPC) space that is quickly spilling over into the enterprise thanks to such trends as the proliferation of mobile devices, the growth of the internet of things (IoT), the rise of video and social media, and the massive amounts of data being generated.
The deal is expected to close by the end of the year.
HPE already offers a broad range of data center hardware that is aimed at an array of workloads. Along with its mainstream ProLiant servers, the company offers high-density Apollo systems for analytics and object-storage workloads up through its high-end Integrity Superdome, NonStop and HP-UX systems for mission-critical tasks such as enterprise relationship planning (ERP), data warehousing and data analytics.
The company’s lineup also includes converged, hyperconverged and composable offerings.
However, the addition of SGI’s in-memory and high-performance products will allow HPE to broaden its portfolio of data analytics products and services and address the rapidly changing demands from enterprises and smaller businesses, according to Antonio Neri, executive vice president and general manager of HPE’s Enterprise Group.
“Organizations large and small are adopting HPC and big data analytics to derive deeper, more contextual insights about their business, customers and prospects, and compete in the age of big data,” Neri said in a post on the company blog. “These businesses see revenue opportunity in the explosion of data being generated from new sources. … Not only will the acquisition of SGI strengthen HPE’s position in the high-growth big data analytic segment, it will also extend our presence in HPC verticals, such as government, life sciences, higher education and research, and manufacturing, as well as supercomputing.”
The two companies earlier this year partnered on a new high-end eight-socket server to handle the growing high-volume Linux workloads that are resulting from the rise in mobile computing and cloud computing and the growth in data. The Integrity x80based MC990 X uses SGI’s UV interconnect technology, which SGI had begun licensing to other system makers.
SGI CEO Jorge Titinger wrote in a blog post that his company’s products will “strengthen HPE’s HPC and Mission Critical businesses, and create one of the industry’s most comprehensive portfolios of high-end computing solutions.”
In SGI, HPE gets a company with about 1,100 employees and $533 million in revenue during its fiscal year 2016, which was an increase over the $521 million the previous year. SGI announced its latest quarterly earnings the same day the HPE deal was made public, saying that revenue for the quarter was $124 million, a drop from the $153 million during the same period last year. However, the company made $3 million, compared with a $4 million loss a year ago.
Demand for HPC capabilities is growing among enterprises, which are having to manage the massive amounts of data that is being generated. Traditional data center systems can’t handle such workloads, so businesses are turning to high-end systems. In addition, HPC systems are being used for scientific research into everything from weather and life sciences to cyber-defenses and artificial intelligence (AI), according to HPE officials. This is driving strong growth in the HPC space, with IDC analysts predicting the market will grow 6 to 8 percent over the next three years. The data analytics segment will grow twice as fast, they said.
“HPE plays in all these growth areas today,” Patrick Moorhead, principal analyst with Moor Insights and Strategy, said in a research note. “HPE workloads are making their way into the enterprise, and architecturally and technologically there are increasing similarities between HPC and Big Data.”
HPE Buying Supercomputer Maker SGI to Bolster HPC Portfolio
Moorhead said SGI not only brings its supercomputers and big data capabilities, but also services and new customers that it’s accumulated during three decades in the tech industry. The deal will make HPE more competitive in both the HPC and data analytics spaces, he said.
The deal comes at a time of transition for HPE, which was created in November 2015 when Hewlett-Packard split in two, separating its enterprise solutions business (HPE) from its PC and printer unit, which is now HP Inc. HPE is trying to navigate a rapidly changing business environment, where enterprises are running more workloads in public cloud environments rather than on servers in their own data centers. They’re also looking to create their own private clouds.
Since the breakup of HP, HPE has spun out its IT services arm, sold off most of its stake in a subsidiary in India and continued to restructure its workforce. In addition, private equity firms reportedly are circling the company, interested in either buying HPE’s software businesses—such as Autonomy or Vertica—or buying the company outright and taking it private. HPE officials have declined to comment on the reports.
SGI had been a top-tier system vendor in the 1980s and 1990s before the rise of increasingly powerful and lower-cost Intel-based servers began their domination of the data center. The company went through bankruptcy in the mid-2000s before being bought by Rackable Systems for $25 million in 2009. Rackable then adopted the SGI name, though the company still sells servers with the Rackable brand.