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Intel Agrees to Buy Switch Chip Startup Barefoot Networks

Intel agreed last week to acquire networking startup Barefoot Networks, in a move to compete with Broadcom in the market for Ethernet switch silicon. Barefoot sells chips that can be programmed to perform various functions. That potentially gives users more control over how the vast networks inside data centers are designed and redesigned.

The deal underscores Intel's efforts to expand its share of overall spending on data centers. Once the deal closes, Intel can start supplying switch chips that direct data over Ethernet networks. Intel could put pressure on Broadcom by pushing Barefoot’s silicon and software to its customer base, including cloud vendors Microsoft and Amazon and switch OEMs such as Cisco, Arista and Juniper, among others.

Barefoot has been trying to pry into Broadcom's stronghold in the Ethernet switch chip market, which industry analysts estimate at $3 billion annually. The company's Tomahawk line is the gold standard for switches with the bandwidth and latency demands of cloud data centers. Broadcom's Trident and Jericho chips are more programmable and target other types of infrastructure that need a broad set of protocols.

Unlike Broadcom's Tomahawk, Barefoot's Tofino chips can be programmed by customers to handle a range of network protocols and other functions that used to depend on switches with fixed functions. Customers can add new functions using Barefoot's open P4 programming language. They no longer have to hold out for upgraded chips to be designed and manufactured by Broadcom or other vendors.

Buying Barefoot "will support our focus on end-to-end cloud networking and infrastructure leadership, and will allow Intel to continue to deliver on new workloads, experiences and capabilities for our data center customers," Navin Shenoy, who leads Intel's data center business, said. Barefoot, founded by Nick McKeown and led by CEO Craig Barratt, serves to "complement to our existing connectivity offerings."

Barefoot's chips stand out for addressing the "ever-changing needs of the hyperscale cloud," Shenoy said. Based on a 16-nanometer process, the first-generation Tofino can process 6.4 trillion bits of data per second (Tbps). Barefoot doubled the speed in its second-generation Tofino 2 to rival Broadcom's Tomahawk 3, which was introduced in late 2018. The new Tofino switch is based on 7-nanometers.

Intel is buying Barefoot amid a slowdown in its data center business. Intel's data center sales have been driven in recent years by Google, Amazon, Microsoft and other major players in cloud services, which are building out data centers to accomodate an ever-increasing deluge of data. But the company's growth has slipped as capital spending on the cloud started to slump in the second half of 2018.

Many customers have slashed orders with Intel after amassing too much inventory in 2018. Sales of the Santa Clara, California-based company's server chips dropped 6% to $4.9 billion in the first quarter, its biggest decline in data center sales in half a decade. The slowdown ahs forced Intel to reduce its 2019 revenue forecast from $71.5 billion to $69 billion. Intel holds more than 95% server chip market share.

The Barefoot deal signals that networking has become a battleground for the largest players in server chips. Nvidia agreed in March to buy Mellanox Technologies, which sells Infiniband and Ethernet chips used in data center switches, for $6.9 billion. In 2016, Marvell advanced its networking ambitions with its $6.1 billion Cavium deal. Marvell's customers include mainsteam switch makers like Cisco and Juniper. 

To protect its market lead, Broadcom is also increasing its investment in programmable chips. Broadcom is mounting a challenge to Barefoot's P4 with its new Network Programming Language (NPL). Using it, customers can add network features to Broadcom's latest Trident 4 and Jericho 2 chips. The Trident 4 switch is designed to have the same speed as the Tomahawk 3 and has started sampling to customers. 

Barefoot has amassed a deep bench of backers, including Sequoia Capital, Dell, Alibaba, Tencent, Andreessen Horowitz, Hewlett Packard Enterprise, Google and Goldman Sachs, which has installed Barefoot's chips in parts of its data centers. The Santa Clara, California-based company, which is also selling its first-generation Tofino switch to Arista, has raised $155 million in funding since it was founded in 2013.

Intel said the deal should close in the third quarter of 2018. Shenoy declined to share the terms of the deal.

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