Microsoft acquires Fungible, a maker of data processing units, to bolster Azure

In December, reports suggested that Microsoft had acquired Fungible, a startup fabricating 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, saying that it plans to use Fungible’s tech and team to deliver “multiple DPU solutions, network innovation and hardware systems advancements.”

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

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

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

Fungible managed to raise over $300 million in venture capital prior to the Microsoft acquisition from investors including SoftBank’s Vision Fund and Norwest Venture Partners. But its DPU architecture was difficult to develop for, reportedly, which might’ve affected its momentum. In August, after a rumored failed sale to Meta, the company revealed that it had laid off staff and was scaling back its product portfolio.

Increasing competition in the market for DPUs put pressure on Fungible, as well. Nvidia acquired DPU maker BlueField in 2019, while AMD snatched up Pensando late last year. Other rivals included GigaIO, Liqid, Lightbits, VMware’s Project Monterey and Amazon Web Services’ Nitro cards, which provide DPU-like functionality.

In Fungible, Microsoft gets DPU tech it could use to bolster Azure — perhaps by selling it as a subscription product or tiered service for block storage. It’s the second data center-centric acquisition in recent months for the tech giant, interestingly, following the purchase of high-speed fiber startup Lumenisity in December.

“The Fungible DPU was invented in 2016 to address the most significant problems 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 the Fungible DPU and software to enhance its storage and networking offerings.”

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