Hewlett-Packard has acquired SGI at a fire-sale price in a deal the company hopes will boost its hand in the HPC (high-performance computing) market.
HPE will pick up SGI for just $275 million, despite the fact SGI had $533 million in revenue during its fiscal 2016.
But the price tag reflects SGI's long and rocky history. It was founded in 1981 with an initial focus on 3D graphics workstations, but faced stiffening competition in the 1990s as Intel x86-powered PCs running Windows began to close the performance gap.
The company filed for Chapter 11 bankruptcy in 2006 and in 2009, Rackable purchased most of its assets for just $25 million in cash, along with some of its debt. It was a dramatic fall for a company that once logged $3.7 billion in annual revenue.
Nonetheless, HPE believes SGI's portfolio will give it an edge in HPC as well as data analytics, as it said in a statement:
The explosion of data -- in volume and variety, across all sectors and applications -- is driving organizations to adopt high-end computing systems to run compute-intensive applications and big data workloads that traditional infrastructure solutions cannot handle. This includes investments in big data analytics to quickly and securely process massive data sets and enable real-time decision making. High-end systems are being used to advance research in weather, genomics and life sciences, and enhance cyber defenses at organizations around the world.
SGI's highly complementary portfolio, including its in-memory high performance data analytics technology, will extend and strengthen HPE's current leadership position in the growing mission critical and high performance computing segments of the server market. The combined HPE and SGI portfolio, including a comprehensive services capability, will support private and public sector customers seeking larger supercomputer installations, including U.S. federal agencies as well enterprises looking to leverage high-performance computing for business insights and a competitive edge.
Analysis: A Win-Win Deal for HPE and SGI
There is life and growth in the high end of the computing market, but the low price HPE is paying for SGI shows that HPC is also facing pressure from cloud and highly distributed computing on commodity clusters, says Constellation Research VP and principal analyst Doug Henschen.
At the super high end of the market, systems used by large corporations, big government research centers and university labs require raised-floor data centers, liquid cooling, optical networking cables and run into the tens of millions of dollars for a complete system, Henschen adds. SGI and Cray have seen growth with lower-cost, sub-$1 million air-cooled systems that sell to smaller manufacturers, pharmaceutical companies, oil and gas firms, universities, government agencies and research labs.
These more mainstream HPC systems allow smaller organizations to do the same sort of advanced modeling and imaging work that only their largest competitors could previously afford. Such systems are also popping up in Hadoop use cases, offering high-performance alternative in a market otherwise dominated by commodity hardware. SGI systems for Hadoop deliver roughly two times the compute and storage capacity, rack for rack, as compared to typical enterprise-class clusters.
"This move complements HPE’s existing product portfolio and gives it a quick entry into the HPC market," Henschen says. "HPE obviously has a global sales and distribution channel that can make the most of SGIs assets, and over the long term it can surely gain manufacturing efficiencies. Given competitive pressures the deal won’t transform HPE’s overall margins, but the deal makes a lot of sense."
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