Intel Buying Ethernet Chip Maker Fulcrum Microsystems

Chip giant Intel is expanding its networking product portfolio with the acquisition of Fulcrum, which makes silicon for 10GbE and 40GbE switches.

Intel, continuing its push to become a chip supplier for all areas of the data center, is buying Fulcrum Microsystems, a vendor that designs chips for Ethernet switches.

Intel officials, announcing the deal for the privately held fabless semiconductor company, said Fulcrum will add to the growing list of data center offerings beyond their core server processors.

"Intel is transforming from a leading server technology company to a comprehensive data center provider that offers computing, storage and networking building blocks," Kirk Skaugen, vice president and general manager of Intel's Data Center Group, said in a statement. "Fulcrum Microsystems' switch silicon, already recognized for high performance and low latency, complements Intel's leading processors and Ethernet controllers, and will deliver our customers new levels of performance and energy efficiency while improving their economics of cloud service delivery."

Financial details of the acquisition were not disclosed. Intel officials expect to close the deal in the third quarter, pending approval by Fulcrum shareholders and government regulators.

The 12-year-old Fulcrum makes 10 Gigabit Ethernet and 40GbE chips that company officials say offer a combination of low latency, converged fabric, flexibility and scalability. Its standards-based FocalPoint silicon product offerings range from its FM2000 Series of L2 switches with up to 24 10GbE ports to its new FM6000 L2-L4 fabric with up to 72 10GbE or 18 40GbE ports.

Fulcrum also offers a number of reference designs, a FocalPoint Software line of applications for Ethernet bridging, switching and routing that is integrated into a Linux framework, and PivotPoint portfolio of line cards.

Arista Networks is a networking company that uses Fulcrum chips in its switches.

"Fulcrum Microsystems has architecture capabilities ideal for low-latency applications, and we are excited about the future possibilities of this technology as Fulcrum is acquired by Intel, the world's largest semiconductor manufacturer," Andy Bechtolsheim, founder, chief development officer and chairman of Arista, said in a statement.

Intel officials said that cloud computing is driving the demand not only for the high performance and low latency offered by 10GbE and 40GbE networks, but also in the continued convergence of data center server, storage and networking technologies. The chip-making giant is looking to take advantage of that convergence to build a portfolio of comprehensive data center building blocks-based around its Xeon processors-that touch on servers, storage and networking.

Intel executives have aggressively pushed to expand their business beyond their traditional PC and server chips. In one direction, the vendor is looking to challenge chip designer ARM Holdings in the booming market for mobile devices like smartphones and tablets.

In the data center, Intel is pursuing the opportunities made available by the growing demand for converged offerings. Most major OEMs-from Hewlett-Packard and Cisco Systems to Dell and IBM-are outlining strategies designed to offer enterprises complete data center solutions. In Intel's case, that means rapidly expanding the capabilities of its Xeon chips while also offering an array of networking and storage technologies, such as Ethernet controllers and solid-state drives.

Intel also is moving into the security space, a strategy highlighted by its acquisition of security software maker McAfee earlier this year.

Analysts with Deutsche Bank said in a July 19 research note that while the deal probably wouldn't impact Intel's bottom line much, it strategically makes a lot of sense, enabling the company to further "leverage its existing strengths in server" processors.

The analysts noted that Intel estimates that through its server chips, it is only able to capture about 2 percent of the money businesses spend on data center technology.

"Intel intends to grow its share of data center spend by expanding into storage, networking and security products," the Deutsche Bank analysts wrote in the research note. "The acquisition of Fulcrum should boost Intel's presence in Networking and complement a strong position in 10Gb Ethernet controllers."

It also will bring Intel into closer competition with the likes of such switch silicon makers as Broadcom and Marvell, they said.