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Fungible sold to Microsoft for $190 million, say multiple sources

DPU startup Fungible has been sold to Microsoft for $190 million despite raising more than $300 million in funding since its incorporation in 2015, according to multiple sources.

The company has appeared increasingly troubled after it laid off staff in August and shrank its product line in November, rowing back on its composable infrastructure ambitions to focus on DPU-enhanced NVMe/TCP storage arrays.

Consultant Dylan Patel, who first broke the story in his subscription-based SemiAnalysis newsletter yesterday, told B&F: “Fungible scrambled for funding from multiple sources and even tried to sell to Meta, but they couldn’t get any traction in the end. Microsoft, at first, was considering a custom silicon deal with Fungible, but … instead decided to acquire the company, employees, and IP at a low price.”

Fungible, founded in 2015 by Pradeep Sindhu and Bertrand Serlet, is based in Santa Clara, California. Both founders worked at Xerox PARC, with Sindhu becoming the founding CEO and chairman of Juniper Networks, then Vice Chairman, CTO, and Chief Scientist. He left to start Fungible and was CEO.  

Serlet progressed to SVP for software engineering at Apple and then founded consumer cloud storage business Upthere, which was bought by Western Digital in 2017. He has no public exec title at Fungible. He and Sindhu devised and built a Data Processing Unit (DPU) chip to offload east-west datacenter traffic, mostly dealing with storage, networking and security matters from host x86 server CPUs, enabling fewer of them to run more application code.

They raised more than $300 million from seed funding and two VC rounds by 2019 to support hardware, software and business development.

The DPU was used to front-end and control a flash storage JBOD, the  FS1600 storage node, with a corresponding version in server hosts. But Fungible’s founders envisaged a bigger market – one based on a DPU-controlled and disaggregated datacenter.

Fungible acquired Cloudistics for its software composability technology in September 2020. The following year it hired Brian McCloskey as chief revenue officer and commercial CEO Eric Hayes, with Sindhu becoming chief development officer. 

However, Fungible was fighting competitors on three fronts:

  • LIghtbits Labs and incumbent storage array vendors offering NVMe/TCP access
  • Liqid, GigaIO and other composable systems vendors with CXL becoming the composability fabric and Fungible having no CXL message
  • Nvidia (BlueField), Intel, and AMD (Pensando) on the DPU front

Intel has won over some hyperscale DPU customers and AMD’s Pensando has also established a list of buyers, as well as Arm processor core support. Nvidia has created an enormous ecosystem with key player VMware providing its software that runs on BlueField. Fungible’s processor was proprietary and getting software on it was not easy compared to Arm CPU targets. 

As such, Fungible pulled back its sales focus to the FS1600 storage product while Sindhu and the board tried to sell the business.

Then along came Microsoft, with its need for efficient Azure cloud datacenters. We understand Redmond has no interest in selling Fungible’s kit to external customers.

In the absence of any other possible suitors and VC funding seemingly drying up, Fungible management, we are told, agreed to a lower offer from Microsoft than they would have liked.

We have asked both Fungible and Microsoft to comment, and Microsoft said it: “doesn’t comment on rumors or speculations.” Fungible has said nothing.

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