Chip Startup Shuts Its Doors

Calxeda, developer of ARM-based server processors, lays off 130 employees in restructuring period.

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Calxeda, a high-profile developer of ARM-based chips for servers and other products, has shut its doors and effectively ceased operations. As part of the move, the startup has laid off nearly all of its 130 employees amid what it calls a restructuring period.

Founded in 2008, Calxeda has raised around $103 million in funding, and has been selling ARM-based server chips in an emerging but increasingly competitive field. HP and other OEMs are developing ARM-based servers. But this so-called microserver segment also has become a major battleground between Intel and about a half-dozen processor suppliers developing new 64-bit MPUs with ARM CPU cores.

Calxeda apparently shut its doors after it was unable it raise another round of financing. “We are pretty much shut down, at least for now,” said Karl Freund, vice president of marketing for Calxeda, in a statement. “We had a deal for financing that fell through at the last minute. So, no time for working a new deal before we ran out of cash. We will see what happens with the assets.”

A spokeswomen for Calxeda confirmed the company has laid off most of its employees, with the exception of support. “The restructuring will determine what happens to the assets and people,” according to the spokeswoman. “For now, we have closed our office and sent everyone home except a few people to continue to support our customers. We have about 130 employees. The product remains available and will be sold/serviced by whatever company takes shape after the restructuring.”

Clearly, though, the company ran into several problems. “The market is just materializing, and it’s a shame that we simply ran out of money at this time. The financing we thought we had lined up disappeared quite suddenly and we ran out of runway to put another deal together,” according to the spokeswoman.

Microservers: How hot is hot?
Computer servers have been the workhorses of the Internet and data networks for decades. Price erosion and the weak global economy have lowered server sales volumes in the past two years, but this particular slice of the market is expected to see a modest rebound in 2014 with worldwide revenues rising about 3% to $54.6 billion, followed by stronger growth in 2015 and 2016, according to IC Insights.

Server unit shipment growth will be stronger in the next several years, driven by purchases of new less-expensive microservers, according to IC Insights. High-density microservers contain many CPUs on microprocessors and emphasize power efficiency for massive amounts of lightweight-computing tasks.

One of the pioneers in this chip segment was Calxeda, which was originally named Smooth-Stone. In 2010, the company obtained $48 million in funding. The investors included ARM, Advanced Technology Investment Co. (ATIC), Battery Ventures, Flybridge Capital Partners and Highland Capital Partners.

In 2011, Calxeda unveiled its ARM-based “EnergyCore” server-on-a-chip, which consumed as little as 1.5 Watts. HP and other OEMs were supposedly developing servers based on the technology. In addition, Calxeda integrated the so-called Fleet Fabric on the device, providing built-in 10 Gigabit Ethernet switching to eliminate additional interconnect hardware cost and power.

Then, in 2012, Calxeda announced $55 million in additional funding. The funding was comprised of investments by Austin Ventures and Vulcan Capital, plus additional participation by the firm’s existing investors.

As the ARM-based server market began to materialize, other larger and more established chipmakers jumped into the fray. AMCC, Nvidia, Marvell, Texas Instruments, HiSilicon, Cavium, and Broadcom are developing ARM-based chips for servers. And AMD is selling a server based on the technology. Not to be outdone, Intel has also fielded an x86-based chip line for microservers.

Microservers are projected to be a fast-growing market sector. The cost of powering and cooling racks of servers now exceeds the price of the server hardware itself, which is why data centers jumped on the virtualization bandwagon in the first decade of this century. The new focus is more intelligent use of the resources, rather than just consolidation of servers, which is where the microservers fit in. They use less energy and run much cooler than the commodity servers that fill most data centers.

“The key metric is dollars per Watt per cubic foot,” said Lakshmi Mandyam, director of server systems and ecosystems at ARM. “About 15% to 20% of the server TAM is addressable by ARM, particularly areas that are I/O or storage-centric. The projection is that ARM-based SoCs could address 30% of the market by 2017.”

Whether ARM achieves that goal remains to be seen, but IC Insights forecasts that microserver sales will climb 139% in 2014 to $580 million from an estimated $243 million in 2013. Between 2012 and 2017, microserver sales are projected to rise by a CAGR of nearly 72%, totaling $1.2 billion, according to the firm.

The total server IC market is projected to increase 3% in 2014 to $14.4 billion after back-to-back annual sales declines of 2% in 2012 and 2013, according to the firm. “But stronger revenue growth will occur in multi-core MPUs for microservers and NAND flash memories for solid-state drives (SSDs), which can significantly boost the performance of servers by enabling more input/output operations per second (IOPS) than standard hard-disk drives,” according to the firm.

—Ed Sperling contributed to this report.



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