We noted last year that the network management space was consolidating, with point solutions being snapped up by platform players, when we wrote about a new investment for Israeli startup Granulate — which applies AI to high-priority computing workloads to optimize how they travel across a customers’ cloud and on-premises networks — Today, that trend has reached the startup itself, with Intel announcing the acquisition of Granulate to expand both its operations in Israel and the capabilities that Intel gives to clients to control traffic on Intel-powered equipment better.
The deal had been a closely guarded secret in Granulate’s home market, with several outlets stating that it had been in the works for a week. Although Intel and Granulate do not include an exact number in their press release today announcing the announcement, well-placed sources tell us the purchase is worth $650 million. The transaction is slated to finalize in Q2 2022, with all 120 Granulate employees joining Intel.
In a statement, Sandra Rivera, executive vice president and general manager of Intel’s Datacenter and AI Group, stated, “Today’s cloud and data center clients expect scalable, high-performance software to make the most of their hardware deployments.” “Granulate’s cutting-edge autonomous optimization software can be applied to production workloads without the client having to change its code, resulting in optimal hardware and software value for every cloud and data center customer.”
“We’re expanding our portfolio of software optimization tools to give us the flexibility and scalability we need to meet the growing demand of the ubiquitous compute era,” said Greg Lavender, Intel’s chief technology officer, senior vice president, and general manager of the Software and Advanced Technology Group. “Granulate’s revolutionary real-time optimization software complements Intel’s existing capabilities by assisting clients in achieving performance benefits, cloud cost reductions, and ongoing workload learning.”
According to PitchBook, Granulate has raised $45.6 million at a low valuation of $110 million, with previous investors including Insight Partners, Red Dot Capital, and Dawn. It last raised money just over a year ago in a $30 million Series B that we highlighted here; thus, this deal appears to have resulted from the company pitching to companies for investment (a moment that often leads to acquisition offers when the conversations are with would-be strategic backers).
On various levels, the acquisition is part of Intel’s larger strategy. To begin with, it emphasizes how Intel is continuing to develop more tools and services to help customers better manage Intel-powered networks, in part to compete more directly with Nvidia, which has been acquiring smaller companies to expand its high-performance computing capabilities and management.
Granulate claims that its software may improve reaction times by up to 40% and throughput by up to five times while lowering expenses by up to 60% for an organization’s workloads across different cloud and on-premise settings. As we’ve previously stated, larger tech companies such as Netflix, Google, and Amazon typically invest significant sums in developing their optimization technology. However, smaller businesses (and you can be huge while still being smaller than Google) would not have the resources — pun intended — to address the issue in the same way.
Asaf Ezra, co-founder and CEO of Granulate, told me last year, “We are aware of comparable things going on inside of Netflix as what we have done.” “However, it demonstrates how huge you need to be to address this issue, as well as the talent you need to hire to address the lowest-level concerns,” says the author.
Granulate will be a natural fit in one respect: the two companies have already worked closely together to develop solutions that optimize resource management for customers who use Intel-based computational architecture. Microsoft, IBM, Google, Datadog, and a slew of other companies are among Granulate’s partners.
Granulate claims that their Intel-Agent, designed to run especially on Intel-based servers, has Intel’s AVX instruction set binary translation (something Intel built to improve performance and lower overhead). Granulate claims that after installing the agent on a specific workload (a 15-minute operation), it uses AI to learn how the task performs and then delivers kernel-level resource CPU scheduling and priority optimization to increase responsiveness.
In terms of talent, there has been some cross-pollination between the two companies: last year, longtime Intel sales director Ron Whitfield moved to oversee business development at Granulate to expand the company’s customer base worldwide and into new industrial areas. If it grew in size, Granulate would have become an acquisition target for Intel’s largest competitors, including Nvidia. The company will be able to scale its business in ways that would have been more difficult to achieve on its own.
“We believe that by working together with Intel, we can help clients achieve significant cost savings and five times the throughput across workloads,” Ezra said today. “With the aid of Intel’s 19,000 software engineers, Granulate will be able to supply autonomous optimization capabilities to even more customers across the world as part of Intel.”
Second, the transaction looks to be part of Intel’s larger aim to extend its influence in Europe, particularly in Israel. The corporation announced a massive €33 billion investment in R&D and manufacturing in Europe earlier this month, the first installment of an expected €80 billion investment over several years in several EU countries, including Germany, France, Ireland, Italy, Poland, and Spain.
Its initiatives in Israel have complemented those efforts and, in some ways, have been at the forefront of what Intel is doing on this side of the globe.
The corporation’s Mobileye branch — which is set to be spun off as a separate company with Intel keeping a major stake — was at the center of Intel’s $600 million investment in its R&D operations in Israel last year. It has also undertaken several additional M&A deals to expand its presence in the country.
In February, it announced its intention to buy Tower Semiconductor for $5.4 billion to expand its custom foundry capabilities. Cnvrg.io has acquired automated machine learning skills, and AI chipmaker Habana Labs has AI chipmaking capabilities. Notably, it has also lost out on a few key acquisitions: after speculated interest in Mellanox, Nvidia eventually acquired the big data semiconductor company.
“For many years, Intel has believed in Israeli innovation…to help stay ahead of the markets in many categories.” “Intel has 12,000 people in Israel, as well as four R&D and manufacturing sites,” said Avihai Michaeli, a transaction advisor to investors and startups. “Mobileye and Tower Semiconductor, two of its most significant acquisitions, are Israeli companies. We understand that the company’s plan for 2022 will be to acquire more software companies in the United States.”
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