Supermicro Shows Off Blades, Posts Financials Ahead of IPO

Published: March 27, 2007

by Timothy Prickett Morgan

Server and motherboard maker Supermicro Computer is showing off its new ServerBlade blade server, which launched late last week at the CeBIT extravaganza in Hannover, Germany. By jumping into the blade server fray, Supermicro is hoping to get a piece of the blade server action, which should amount to $5 billion or more in sales in 2007. Getting into the profitable blade server niche will be important for the San Jose, California, company, which last November filed to go public.

Supermicro has been an innovator in the design of motherboards for servers for many years, and plenty of whitebox server vendors use its products because they often have features ahead of other suppliers, such as support for the latest processors. These days, Supermicro is also itself a supplier of systems and is arguably one of the largest whitebox server sellers in the world, and provided the IPO goes well and it can fuel its growth, it may even grow sufficiently to earn the right to be referred to by its name without the whitebox adjective thrown in.

The SuperBlade design that Supermicro has just launched has all the feeds and speeds that blade server buyers look for. The SuperBlade chassis comes in a 7U form factor and it holds 10 two-socket or four-socket blades. Each blade can have up to 64 GB of main memory, and there will be variants of the blades to run Opterons 2000s and 8000s from Advanced Micro Devices and Xeon 5100s, 5300s, and 7100s from Intel. Each blade in the ServerBlade setup has two Gigabit Ethernet ports for linking to outside networks for server clustering and storage, and will also support InfiniBand links. Each blade also has two bays for hot-plug 2.5-inch SAS or 3.5-inch SATA-II disks.

Pricing information for the chassis and blades has not been divulged yet, and Supermicro has not yet said when the SuperBlade will ship or what operating systems it will support. Windows and Linux are obviously the big choices, with VMware virtualization and just possibly Solaris thrown in.

Interestingly, what Supermicro has divulged is its detailed financial history in a preliminary prospectus as it prepares to go public. In its S1 filing last fall, when it announced it was going public, Supermicro talked very generally about how its sales had grown from $89.3 million in fiscal 2002 (ended in June of that year) to $302.5 million in fiscal 2006. In the past four years, profits have grown faster than sales, and in fiscal 2006, Supermicro brought $16.9 million in the bottom line.

With the prospectus, Supermicro has identified where it is making its money. The company's finished server business is growing, up from $51.2 million in fiscal 2004, or about 30.6 percent of total sales, to $104.5 million in fiscal 2006, or about 34.5 percent of sales. In the six months ended December 31, 2006, server sales came to $71.9 million, or 35.3 percent of sales. While Supermicro's mix is shifting ever so slightly toward system boards, it still gets almost two-thirds of its sales from server boards and other components. Supermicro sold $131.9 million in server components, up 44 percent compared to the prior fiscal year's same six-month period.

Also in the six months ended December 2006, $119.2 million, or 59 percent of Supermicro's sales, were to customers in the United States. The United Kingdom accounted for $10.2 million in sales, Germany for $14.8 million, with the rest of Europe together accounting for $23.3 million. Asia is Supermicro's third biggest market after the U.S. and Europe, with $30.7 million in sales. The company did only $5.5 million in sales outside of these three regions in the six-month period.

According to the prospectus, Supermicro plans to float 6.4 million shares and existing stockholders in the company plan to sell 1.6 million shares; the company doesn't get the proceeds from the latter sales, of course. The Supermicro IPO is being underwritten by Merrill Lynch, UBS, and Needham & Company, and they have the right to sell an additional 1.2 million shares if the offering is well received by Wall Street.

The prospectus also revealed the family business nature of Supermicro. Charles Liang, Supermicro's founder, president, chief executive officer, and chairman, hired Ablecom Technology for design and manufacturing support for Supermicro's products (mainly chassis and power supply design); his brother Steve is that company's CEO and largest shareholder. Supermicro also revealed that it uses Taiwanese industrial giant Tatung as its contract manufacturer.

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