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Microsoft acquires DPU maker Fungible

Microsoft has acquired Fungible, possibly giving Azure its own data processing units.

Editor's note: This story was updated Jan. 9, 2023.

Microsoft's acquisition of Fungible Inc., a startup known for its data processing units, has caught some industry watchers off guard. But considering the hyperscaler landscape and the reported price tag  -- $190 million -- the idea may be less surprising, analysts said.

News of the acquisition surfaced in late December, but it wasn't until Jan. 9 that both companies confirmed the deal. Fungible's team will join  Microsoft's data center infrastructure engineering teams, which will focus on DPU services for storage and networking, according to a press release. The price of the acquisition was not disclosed.

Fungible made a name for itself with its data processing units (DPU), part of the company's vision to enable customers to compose storage as needed instead of adding nodes. DPUs are programmable processors designed to decouple network and communication tasks from processing tasks, freeing up its CPUs to focus solely on processing data.

"Allowing the compute engine to do computations gets you more value from your hardware investment," said Randy Kerns, primary and secondary analyst at Evaluator Group.

For Microsoft, acquiring Fungible, a story first reported by consultant Dylan Patel in his substack SemiAnalysis, may be rooted in competition. AWS offers customers Nitro cards, which provide DPU-like functionality and is a technology the company continues to invest in, having unveiled version 5 at last month's re:Invent.

Microsoft may be looking to keep in lockstep with the competition, according to Scott Sinclair, practice director at TechTarget's Enterprise Strategy Group. Azure could take Fungible's DPU technology and, for example, make a more efficient, faster cloud, sell it as an as-a-service or as a tiered service for block storage, he said.

"You can either build it yourself, build with a partner or buy it," Sinclair said.

Shifting market trends

Fungible was founded in 2015 by Pradeep Sindhu, co-founder of Juniper Networks, and Bertrand Serlet, a former senior vice president of software engineering at Apple, and raised more than $300 million in venture capital funding. But in August, the company revealed it had laid off staff and was scaling back its portfolio.

Part of the company's struggles may have been a shifting market, with Nvidia's acquisition of Mellanox's BlueField in 2019 and AMD's acquisition of Pensando earlier this year. Fungible also competes with the likes of VMware's Project Monterey.

Fungible's strategy was to bring not just a new product to market but also a new way of doing things, as it looked to replace the server with a custom hardware design, according to Kerns. But getting customers to buy into an infrastructure redesign can be a slow process, he said.

Independent analyst Tim Stammers echoed the point. "What [Fungible] was trying to do was very ambitious," he said. "It would have ultimately involved a fairly significant change to data center architectures."

Stammers said he also believes Fungible's DPU design may have been limiting for customers, including its reliance on two OSes -- one open source and the other proprietary -- and a microprocessor architecture that made development more difficult.

Stammers said it appears the venture capital money dried up before the technology took off, and Microsoft was possibly at the right place at the right time.

Stammers said it appears the venture capital money dried up before the technology took off, and Microsoft was possibly at the right place at the right time. He added that he expects the name Fungible to disappear, and Microsoft to make the technology a refinement to Azure.

Adam Armstrong is a TechTarget Editorial news writer covering file and block storage hardware and private clouds. He previously worked at

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