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.
Currently SeaMicro sources its processors from Intel. Even if AMD replaces all of Intel's chips, the incremental share gains will be minimal. However this acquisition will provide AMD with the technology to assist other server makers so that they can offer the same technology and features. In the process, AMD will have the opportunity to improve its relationship with these server makers and push its own server chips into the market.
Our price estimate for AMD stands at $9.16 , implying a close to 30% premium to the market price. Click here to find out how a company's products impact its stock price at Trefis. Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.