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Sanmina-SCI buys Newisys

Electronics contract manufacturer Sanmina-SCI Thursday confirmed it is buying server maker Newisys in a deal set to close in a few days.

San Jose, Calif.-based Sanmina said Newisys' technology would be combined with its manufacturing services to help it transition from 32-bit to 64-bit computing.

Newisys, an Austin, Texas, startup headed by former IBM and Dell execs, will become a wholly-owned subsidiary. Newisys was founded in 2000 to build 64-bit products based on AMD's Opteron chip. It makes a complete dual-processor 1U rackmount server. IBM signed on as a Newisys customer in April of this year; in May, the company landed an OEM deal with RackSaver, a provider of high-density individual rack-optimized servers and supercomputing clusters. Newisys also worked with Microsoft for more than two years on Windows Server 2003-related technologies such as 64-bit capabilities, system management, and dynamic partitioning.

Sanmina-SCI builds the Opteron server line, which shipped in April. It also has a three-year outsourcing contract with IBM worth $3.6 billion. As part of the outsourcing deal, Sanmina-SCI acquired IBM manufacturing operations in Mexico and Scotland for some desktop and laptop computer manufacturing.

The move is good business for Newisys, said Kevin Krewell, general manager for market research firm InStat/MDR, allowing it to expand its horizons beyond Opteron. But it's bad news for the companies' partner, AMD.

"The goal of Newisys was to build server building blocks based on AMD technology and sell it thru OEMs or directly to system integrators," Krewell said. "The reason Newisys is selling out right now is that AMD isn't creating enough volume for Newisys to stay in the business pay back its backers... which include AMD."

The big question according to Krewell is, "now that Sanmina-SCI wholly owns it, will the Newisys team be as dedicated to AMD solutions, or will its attention be diverted? AMD had a dedicated group of talented engineers desiging for Opteron. Now, they'll be building boxes for other chips and architectures."

Financial terms of the deal were not disclosed. Shares of Sanmina were down as much as 7 percent during midday trading on the news.