AMD Buys Networking Technology Maker Pensando for $1.9 Billion

(Bloomberg) -- Advanced Micro Devices Inc. is acquiring closely held Pensando Systems Inc. to add chips and software used to route information inside computer systems.

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AMD will pay about $1.9 billion, before working capital and other adjustments, the Santa Clara, California-based company said in a statement. The acquisition is expected to close in the second quarter, AMD said. Pensando’s customers include Goldman Sachs Group Inc., Microsoft Corp.’s Azure, Hewlett Enterprise Co. and Oracle Corp.’s cloud unit.

Under Chief Executive Officer Lisa Su, AMD has resurrected its data center chip business where it’s the chief rival to Intel Corp. in providing microprocessors that run corporate networks and the internet. Su is adding new capabilities -- programmable chips, graphics parts and now data packet processing chips -- to beef up the company’s offerings and satisfy more of the growing demand for machinery that controls and makes sense of internet data.

“To build a leading-edge data center with the best performance, security, flexibility and lowest total cost of ownership requires a wide range of compute engines,” Su said in the statement. “The Pensando team brings world-class expertise and a proven track record of innovation at the chip, software and platform level which expands our ability to offer leadership solutions for our cloud, enterprise and edge customers.”

Recapturing share in data center chips where AMD had been reduced to less than 1% of the market has been a key component to helping the company grow and become more profitable. AMD’s shares climbed as much as 1.7% in intraday trading Monday after news of the deal.

AMD’s 2021 revenue grew 68% from the preceding year. Its gross margin -- the percentage of sales remaining after deducting costs of production -- will be about 51% this year. That’s nearly on par with Intel’s projection for 51% to 53%. In 2016, Intel had boasted a margin of more than 63%, while AMD was at 31%.

(Updates with shares in the penultimate paragraph.)

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