HPE aims for a big-data boost with $275 million SGI buy

The price looks good but will it help to revive HPE's fortunes?

HP Enterprise CEO Meg Whitman
HP Enterprise CEO Meg Whitman Credit: HP

Hewlett Packard Enterprise is buying SGI in a $275 million deal that it hopes will give it a major boost in big-data analytics and high-performance computing.

It's the latest surprise development at HPE, which has continued to make big changes since it was formed in the break-up of the old Hewlett-Packard last year.

The deal to buy SGI, announced Thursday, fits with HPE's goal to expand its data analytics business. It will also make HPE a bigger player in high performance computing, a growing part of the server market. 

SGI has roughly 1,100 employees worldwide. On Thursday, it reported a net loss for its last fiscal year of $11 million, on revenue of $533 million.

"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," including government, life sciences, higher education and research, manufacturing and supercomputing, Antonio Neri, head of HPE's Enterprise Group, said in a statement.

SGI's in-memory high-performance data-analytics technology, in particular, will bolster HPE's position in the HPC server market, the company said.

With a long and tempestuous history dating back to 1982, SGI was founded by Jim Clark, who later went on to launch Netscape. Originally called Silicon Graphics Inc., it was rebranded following its descent into bankruptcy and subsequent acquisition by Rackable Systems in 2009.

HPE faces challenges of its own since the split from HP's printer and PC group. Like other legacy technology companies, it's been struggling to adapt to the new business model of cloud computing.

So far this year, HPE has killed off its public cloud service and announced plans to spin off most of its IT services division into a new company jointly owned with CSC. It's also seen several top executives announce plans to leave the company.

This deal isn't the first time SGI and HPE have joined forces: SGI's NUMAlink interconnect is part of HPE's Integrity servers. What remains to be seen is whether acquiring a storied name like SGI can give HPE the boost it needs.

First and foremost on the positive side are SGI's continuing advancements in HPC and analytics products based on Intel silicon, said Charles King, principal analyst with Pund-IT.

"That is highly complementary to HPE's technology and business focus, meaning that it should be easy for the companies to find common synergies," King said.

Another significant benefit is the price.

"When you consider some of the lofty valuations of recent IT acquisitions -- many of which were unprofitable or marginally so -- HPE's purchase looks like a terrific deal," he said. "That will be especially true if projections for continuing healthy growth in sales of HPC and advanced analytics solutions come to pass."

There's a growing overlap between HPC and big data, both architecturally and technologically, said Patrick Moorhead, president and principal analyst with Moor Insights & Strategy.

SGI's Ice line of servers makes it a key player in high-performance computing, while its UV line gives it strong big-data capabilities, Moorhead said. In HPC, it boasts "very strong customer relationships that span decades."

"I believe this acquisition will make HPE more competitive in HPC and could do the same in big data," he said. "HPE will need to invest and integrate to make it additive."

The transaction is expected to close in the first quarter of HPE's fiscal 2017, which ends in January.

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