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Why Hewlett Packard Enterprise bought SGI

Despite the company's spinoffs, this acquisition makes sense

Meg Whitman HPE Discover

Hewlett Packard Enterprise (HPE) has just bought SGI in a deal costing the self-styled oldest startup in Silicon Valley $275 million.

If you have never heard of SGI before, or have a somewhat hazy memory of the company, let us fill you in.

SGI was founded as Silicon Graphics Computer Systems in 1981 and was one of the biggest names in high-performance computing (HPC), initially specialising in 3D graphics workstations. However, as desktop PCs became more and more advanced, including 3D graphics capabilities, SGI's market declined and it eventually filed for bankruptcy in 2009.

But that wasn't the end of the story - the company was bought by Rackable Systems in a deal worth $42.5 million, which then rebranded as Silicon Graphics International - aka SGI.

So why would HPE, which split from HP last year and has since been spinning off units at a regular pace, suddenly be buying SGI? Particularly as it's only a week since rumours began to swirl that HPE was itself about to be bought by private equity firms.

The answer, it would seem, is to fully ground itself in the growing areas of big data, AI and HPC.

In its announcement of the acquisition, HPE itself referenced SGI's HPC and big data analytics credentials, with the executive VP and GM of the company's enterprise group, Antonio Neri, saying: "At HPE, we are focused on empowering data-driven organisations. SGI's innovative technologies and services, including its best-in-class big data analytics and [HPC] solutions, complement HPE's proven data centre solutions."

Speaking to IT Pro, Bola Rotibi, research director at analyst firm Creative Intellect UK, said: "Everyone is waiting to find out what is happening with HPE. They have been streamlining to the extent that the private equity rumours started ... but maybe this is HPE's big comeback."

Rotibi said that the acquisition "makes sense" from the point of view of the SGI's HPC and analytics capabilities.

"It's where things are going, it's a growth area and for that and IoT, you need processing power," she said. "So buying SGI is not a bad idea and it's a cheap move."

Rotibi added that while "lots of people would like to write off HPE", it still has an excellent pedigree in enterprise, a decent portfolio and a good-size footprint.

What is still required to stop the doom-mongers circling and rumours spreading, though, is a sense of strategy. Whether that will come with the acquisition of SGI, particularly in a concrete, spelled-out form, remains to be seen. But for now, perhaps making a purchase like this while spinning off other departments isn't quite so paradoxical after all.

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