Microsoft acquires Fungible, a computing device maker, to strengthen Azure

In December, reports suggested that Microsoft had acquired Fungible, a startup that makes a type of data center hardware known as a data processing unit (DPU), for around $190 million. Today, Microsoft confirmed the acquisition but not the purchase price, and said it plans to leverage Fungible’s technology and team to provide “multiple DPU solutions, networking innovations and hardware system advancements.”

“Fungible’s technologies help enable high-performance, scalable, disaggregated, scale-in data center infrastructure with reliability and security,” wrote Girish Bablani, CVP of Microsoft’s Azure Core division, in a blog post. ‚ÄúToday’s announcement again signals Microsoft’s commitment to long-term, differentiated investments in our data center infrastructure that expands our broad range of technologies and offerings, including offloading, improving latency, increasing server density in the data center, optimizing energy efficiency and reducing costs. “

A DPU is dedicated hardware designed to perform specific data processing tasks, including security and network traffic routing. The approach aims to help reduce the load on CPUs and GPUs for core computing tasks related to a given workload.

Fungible was created in 2016 by Bertrand Serlet, a former Apple software engineer who, along with Krishna Yarlagadda and Jupiter Networks co-founder Pradeep Sindhu, sold a cloud storage startup, Upthere, to Western Digital in 2017. Fungible sold DPUs based on two operating systems, one open source and the other proprietary, and a microprocessor architecture called MIPS to control flash memory volumes.

Fungible managed to raise over $300 million in venture capital from investors including SoftBank’s Vision Fund and Norwest Venture Partners prior to the Microsoft acquisition. But its DPU architecture was reportedly difficult to develop, which may have hampered its momentum. In August, after an alleged failed sale to Meta, the company announced that it had laid off employees and reduced its product portfolio.

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Increasing competition in the DPU market also put Fungible under pressure. Nvidia acquired DPU maker BlueField in 2019, while AMD snapped up Pensando late last year. Other competitors included GigaIO, Liqid, Lightbits, VMware’s Project Monterey, and Amazon Web Services’ Nitro cards, which offer DPU-like capabilities.

With Fungible, Microsoft is getting DPU technology that it could use to power Azure — perhaps by selling it as a subscription product or tiered block storage service. Interestingly, it is the second data center-centric acquisition in recent months for the tech giant, following the purchase of high-speed fiber startup Lumenisity in December.

“The Fungible DPU was invented in 2016 to address the key problem in scale-out data centers: the inefficient execution of data-centric computations within server nodes,” Fungible wrote in a statement on its website. “We are proud to be part of a company that shares Fungible’s vision and will leverage Fungible’s DPU and software to enhance its storage and networking offerings.”

The Fungible team will join Microsoft’s data center infrastructure engineering teams, Bablani said.