Intel has signed a definitive agreement to acquire Fulcrum Microsystems Inc., a privately held fabless semiconductor company that designs Ethernet switch silicon for data center network providers.

“Intel is transforming from a leading server technology company to a comprehensive data center provider that offers computing, storage and networking building blocks,” said Kirk Skaugen, Intel vice president and general manager, Data Center Group.

“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.”

10GbE networks are one of the fastest-growing market segments in the data center today. As demand for data continues to increase, there is a growing need for high-performance, low-latency network switches to support evolving cloud architectures and the growth of converged networks in the enterprise. Fulcrum Microsystems designs an integrated, standards-based 10GbE and 40 Gigabit Ethernet (40GbE) switch that has low latency and workload balancing capabilities while helping provide superior network speeds.

The acquisition marks a major shift for Intel, expanding its business beyond chip-making.  Several companies, from HP to Dell, have delved into cloud services of some sort, many looking to escape the downward spiral of the PC market.  Peripheral manufacturers like Intel are gravely affected by the shift in consumer electronics, and Intel in particular has hard time keeping up with this trend.

As Intel enters this market, it faces a good deal of competition.  Cisco is a leader in the network switches space, though it’s having a tough time on its own.  Currently in the process of restructuring its entire company to survive the current economy,  Cisco’s gaining its share in the market by returning to its core competencies.

In Cisco’s Data Center Fabric, the company has delivered a set of features and innovations that solve some of the most difficult networking challenges found in virtualized infrastructure.  IP address and VM mobility plus adapter and VM Fabric EXtenders (FEX) offer increased support for virtualized data center infrastructure offering designers flexibility to move virtualized assets independent of location.  These innovations are proposed by Cisco, promising virtualization-aware networking, lower cost and increased performance.

Juniper Networks is also a strong competitor in this space.  It is in the business of network innovation. From devices to data centers, from consumers to cloud providers, Juniper Networks delivers the software, silicon and systems that transform the experience and economics of networking.

Intel is doing its best to keep up with the competition, choosing the move to acquire Fulcrum Microsystems Inc. to improve its services.  We can expect to have better devices in these coming months, and we’ll keep an eye on Intel’s progress moving forward.