AMD Steps Up Efforts in Server Market

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- In a move to improve its performance in the server market, AMD (AMD) recently announced plans to acquire SeaMicro for a payment of $334 million.

SeaMicro builds micro servers that essentially pack together several chips to save space and energy. The deal attempt is an attempt to improve upon AMD's company's consistently poor performance compared to Intel (INTC) in the server market over the past few quarters.

Going forward, this market is going to get even more competitive as companies such as Nvidia (NVDA) others enter with ARM-based server chips. AMD is looking to leverage this acquisition to gain server processor market share as soon as it can.

See our complete analysis for AMD here.

The server market is lucrative. Data consumption over the Internet is growing and is being driven as media and retail commerce shifts to online platforms. There are growing needs for cross-country collaboration for companies, increased cloud computing capabilities and infrastructure to support the growing number of Internet users.

Servers are required to handle data traffic, and the market for server microprocessors will continue to grow at a healthy rate even in the face of slower PC demand. As such we believe this business will become critical for AMD, and the company currently has very low market share in the server microprocessor market -- and hence plenty of room to grow.

We estimate that currently the server business constitutes just about 12% to AMD's stock value.

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