AMD throws SeaMicro x86 micro-server business overboard

2012's hot technology goes cold in 2015

SeaMicro, the x86 microserver start-up acquired by chip-maker AMD in 2012, has been shut down, with the remaining staff re-assigned to other parts of AMD. The company will continue developing ARM-based microprocessors intended for both servers and embedded devices, as well as its core x86 microprocessors for laptops, servers and PCs.

The decision followed the announcement of the company's first quarter results, in which revenues slipped further, down by one-quarter from $1.4bn to $1.03bn, while losses widened, from $20m to $180m. The decision was widely interpreted as a cost-cutting move by new CEO Lisa Su.

"Under the backdrop of a challenging PC environment, we are focused on improving our near-term financial results and delivering a stronger second half of the year based on completing our work to rebalance channel inventories and shipping strong new products," said Su.

SeaMicro was acquired by AMD in 2012 for $334m as the microserver hotted up. By integrating most of the server motherboard functions onto a single chip, with the exception of memory, boot flash and power circuits, enabling servers to be more densely packed and to consume less power.

The aim of the acquisition was to provide a "hot" new market into which AMD x86 and ARM-based products could be sold. However, microserver technology never took off as anticipated, while users criticised the company for trying to cram more microprocessors into a single box, running a single operating system, than was necessary. Demand was therefore correspondingly low.

AMD also blamed a particularly soft PC market, which Su attributed to customers keeping their wallets tightly shut in advance of the release of Windows 10, which will replace the unloved Windows 8.1 in the autumn.

"We saw poor results in the quarter as our customers managed inventory levels amid uncertain consumer demand," Su told analysts during a results question and answer session. "Given some of the uncertainties in the market we are being conservative on the second quarter," she added.

"It's hard to predict when the overall PC market will normalise," Su continued, "but we are preparing for a better second half of the year as Windows 10 computers make their way into the market."

The one unambiguously bright spot for AMD remains the continued popularity of Microsoft's Xbox One and Sony's PlayStation 4, for which AMD exclusively provides microprocessors. Its ATi graphics cards - since rebranded AMD - also enjoy around half the market for graphics cards.