Hewlett Packard Enterprise has agreed to acquire Silicon Valley legend SGI for $275 million in a move to boost its presence in the growing big data and high performance computing (HPC) markets.
SGI is the latest incarnation of a company that started out in 1981 as Silicon Graphics Inc., made its name with 3D graphics workstations, and was acquired by Rackable Systems after filing for bankruptcy in 2009. It sells supercomputers and an in-memory supercomputer known as the UV that works with in-memory databases.
HPE, which split from Hewlett-Packard last year, said Thursday it will pay $7.75 a share for SGI, a premium of 41% to its closing price on Wednesday. In trading Friday, the stock was up 28% on the day at $7.69.
“SGI’s innovative technologies and services, including its best-in-class big data analytics and high-performance computing solutions, complement HPE’s proven data center solutions designed to create business insight and accelerate time to value for customers,” Antonio Neri, executive vice president of HPE’s Enterprise Group, said in a news release.
HPE noted that the $11 billion high-performance computing segment is expected to grow at an estimated annual growth rate of 6% to 8% over the next three years, with the data analytics segment growing at over twice that rate.
SGI’s business has sagged in recent years, its sales declining from $767.2 million in 2013 to $529.9 million the following year. It generated $521 million in revenues in 2015 but lost nearly $39 million.
As Fortune reports, high-performance computing “faces stiff competition from big cloud computing vendors like Amazon, Microsoft, and Google, which continue to roll out advanced data analytics services and could undercut the need for businesses buy this type of powerful hardware.”
“HPE, like other big hardware vendors like EMC, believes that not every customer will move all their data and data processing needs to cloud vendors because of regulatory issues and privacy concerns, and will still need to buy hardware for their own internal data centers,” Fortune said.