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Hewlett Packard Enterprise Just Spent Millions on This Supercomputer Maker

Aug 11, 2016

Hewlett Packard Enterprise isn’t slimming today.

The business technology giant said Thursday that it will buy computing hardware maker SGI for roughly $275 million. HPE said the deal should close in the first quarter of its fiscal 2017 as long as regulators approve it.

For the past several months, HPE (hpe) has been slicing off chunks of its business it no longer wants, like a majority stake in the Indian outsourcing subsidiary Mphasis it sold for $825 million in April, and an IT services business group it spun out and merged with Computer Sciences in May to form a new joint venture.

Rumors then percolated in July that HPE was looking to continue selling off unwanted businesses—like a software unit it inherited from its 2011 acquisition of business software company Autonomy—to private equity firms, and that some private equity firms were thinking of buying the entirety of HPE.

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For now, however, HPE seems to want to boost its data analytics business as well as selling heavy duty computing systems through this acquisition.

"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," HPE executive vice president and general manager Antonio Neri said in a statement.

SGI was created in 1981 and was originally known as Silicon Graphics, Inc. Many of its former employers have gone on to work for other big technology companies over the years like Intel (intc), Nvidia (nvda), and supercomputer maker Cray, explained Patrick Moorhead, the president and principal analyst at Moor Insights & Strategy.

Over the years, SGI faced tough competition from businesses like Sun Microsystems. The company lost its luster, filed for bankruptcy protection, and sold its assets to the technology company Rackable Systems in 2009. Rackable incorporated the new technology into its own portfolio of products and changed its name to SGI. The company sells supercomputers and is “respected particularly with government and research entities,” said Moorhead.

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One particular device that HPE could find especially appealing is SGI’s so-called in-memory supercomputer known as the UV. This UV supercomputer works with what are known as in-memory databases like SAP’s HANA database and another product by Oracle.

In-memory databases have gotten a lot of traction over the years with data experts because they can process data much faster than traditional databases and are good for analyzing information in real time.

Still, HPE faces stiff competition from big cloud computing vendors like Amazon (amzn), Microsoft (msft), and Google (goog), which continue to roll out advanced data analytics services and could undercut the need for businesses buy this type of powerful hardware.

Hewlett Packard Enterprise Cloud Chief Exits

HPE, like other big hardware vendors like EMC (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.

Matthew Eastwood, a senior vice president of IDC's enterprise infrastructure and datacenter group, wrote in an email that he believes this acquisition will ultimately lead to more sales of SGI’s supercomputers. “HPE’s direct sales organization and channel reach could help grow the SGI business more than SGI could have achieved on their own,” he wrote.

Shares of HPE were up 1.1% in after-hours trading on Thursday to $21.78.

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