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Sanmina to scoop up server maker

Newisys, a start-up working with AMD's Opteron server chip, is being bought by contract computer manufacturer Sanmina-SCI, according to sources close to the company.

Newisys, a start-up hoping to popularize the Opteron chip from Advanced Micro Devices, is being bought by contract computer manufacturer Sanmina-SCI, according to sources close to the company.

The Austin, Texas-based server start-up--founded by a number of executives from IBM, including CEO Phil Hester--sells servers built around Opteron, which debuted in April. The company also licenses its designs and intellectual property to other manufacturers.

The transaction is expected to be announced soon, sources said, although the final form of the transaction is uncertain. Sanmina may buy the company outright, or merely buy the valuable parts and leave a corporate shell. Either way, the intellectual property and engineering talent are going to Sanmina, sources said.

Newisys and Sanmina declined to comment.

Although its servers have received high marks from those who have tested them (Microsoft showed one onstage at its WinHEC conference in May), Newisys has been facing the grinding pressure of trying to break into the hardware business. Corporate buyers often examine and test new products for months before buying anything, and they generally prefer to deal with established manufacturers.

"They designed a very impressive product that was a little ahead of the market for where AMD processors were," said Nathan Brookwood, an analyst at Insight 64.

Brookwood also noted that something of a mismatch existed between the company's servers and the audience for them. Newisys's servers come with expensive features that are primarily of interest to large corporate customers. Initial customers for Opteron servers, however, appear to be research organizations and other high-performance computing customers, who care more about price.

Sanmina would seem to be a logical buyer, said Brookwood, who did not comment on any actual deal. The company makes computers for a number of brand-name manufacturers, including IBM. IBM has already committed to using Opteron in servers, although Big Blue said it will design these servers itself.

Newisys also recently laid off a number of executives, mostly in marketing and sales, according to sources. Investors include New Enterprise Associates, Austin Ventures and AMD.