AMD to buy cloud startup Pensando for $1.9 billion in data center push

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Signs of AMD are seen at the China Digital Entertainment Expo and Conference, also known as ChinaJoy, in Shanghai

(Reuters) – Chip designer Advanced Micro Devices said on Monday it would acquire cloud startup Pensando for $1.9 billion to bolster its data center products and capitalize on booming demand from cloud and enterprise sectors.

AMD said the deal value does not include working capital and other adjustments.

Pensando, which was founded in 2017 by a group of four ex-Cisco Systems Inc engineers, counts Goldman Sachs and Microsoft Corp’s cloud unit Azure as its customers.

The startup makes a fully programmable processor and a software platform, which helps enterprise clients and data center customers to function more like cloud computing data centers like Amazon’s Amazon Web Services.

In cloud computing, customers can order as much computing power as needed in different parts of the world with a few mouse clicks. The software takes care of the mechanics of shuffling the data to the right physical machines.

The lucrative data center chip business is rife with competition, with AMD rivals Intel Corp and Nvidia Corp <NVDA.O stepping up their offerings to grab market share and as software to ensure that chip performance is optimum is becoming an increasingly important part of chip makers’ offerings.

Only last month, Nvidia had released a new chip to speed up artificial intelligence functions in data centers.

The deal, which would enable AMD to add Pensando’s platform to its line of processors and graphics chips, is expected to close in the second quarter of this year.

Pensando’s Chief Executive Officer Prem Jain and the entire team will join AMD’s Data Center Solutions Group.

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(Reporting by Chavi Mehta in Bengaluru and Jane Lanhee Lee; Editing by Amy Caren Daniel)