Advanced Micro Devices Inc. is acquiring closely held Pensando Systems Inc. to add chips and software used to route information inside computer systems.
AMD will pay about $1.9 billion, before working capital and other adjustments, the Santa Clara, California-based company said in a statement. The acquisition is expected to close in the second quarter, AMD said. Pensando’s customers include Goldman Sachs Group Inc., Microsoft Corp.’s Azure, Hewlett Enterprise Co. and Oracle Corp.’s cloud unit.
Under chief executive officer Lisa Su, AMD has resurrected its data center chip business where it’s the chief rival to Intel Corp. in providing microprocessors that run corporate networks and the internet. Su is adding new capabilities — programmable chips, graphics parts and now data packet processing chips — to beef up the company’s offerings and satisfy more of the growing demand for machinery that controls and makes sense of internet data.
“To build a leading-edge data center with the best performance, security, flexibility and lowest total cost of ownership requires a wide range of compute engines,” Su said in the statement. “The Pensando team brings world-class expertise and a proven track record of innovation at the chip, software and platform level which expands our ability to offer leadership solutions for our cloud, enterprise and edge customers.”
Recapturing share in data center chips where AMD had been reduced to less than 1 percent of the market has been a key component to helping the company grow and become more profitable.
AMD’s 2021 revenue grew 68 percent from the preceding year. Its gross margin — the percentage of sales remaining after deducting costs of production — will be about 51 percent this year. That’s nearly on par with Intel’s projection for 51 percent to 53 percent. In 2016, Intel had boasted a margin of more than 63 percent, while AMD was at 31 percent.
