Intel To Pay $650M For Israeli Cloud Startup Granulate: Report

The U.S. chip behemoth was already working with Granulate’s cloud computing optimization products through its Mobileye subsidiary.

Intel plans to add to its rapidly expanding portfolio to buy Israeli cloud service company Granulate for a whopping $650 million, according to Israel’s largest daily newspaper, Haaretz.

A spokesperson for the Santa Clara, Calif.-based silicon giant declined to comment on the deal, but Intel has already been working with Granulate’s software product, which improves real-time performance of cloud servers. Tel Aviv-based Granulate has raised $45 million since its inception and was valued at just under $150 million, according to the Crunchbase and Haaretz. That will earn the first investors huge returns if the Intel sale goes through at the reported price. The deal is not yet final, the report noted.

According to unnamed sources from Haaretz, $100 million will be set aside for severance packages and talent retention of 70 of Granulate’s workers. Intel employs 14,000 people in Israel at R&D centers and its soon-to-be-spun-off concern, Mobileye – which Intel purchased back in 2017 for $50 billion.

Kent Tibbils, vice president of marketing at Campbell, Calif.-based ASI Corp., said Intel’s investment on the software side can benefit partners with better performance across the board. “This would clearly show a commitment to software development on their part – to optimize their software to take advantage of new technology is huge. And it’s clearly going to help in the AI space.”

Mobileye is already using Granulate’s Intel Workload Optimizer to make its cloud-dependent autonomous driving technology more efficient.

Asaf Ezra and Tal Sayag founded Granulate in 2018.

“Companies of all sizes are facing an increased demand for computing resources. The Intel Workload Optimizer by Granulate helps maximize the use of computing resources while improving performance and reducing costs,” Ezra said in a statement from an Intel business brief from 2021.

According to the brief, Granulate achieves up to 60 percent cost reductions on various applications used for Mobileye. And Intel clearly sees the benefit in investing in cloud computing, noting in their white paper that “the global cloud computing market is expected to exceed $1 trillion by 2026…”

Intel has been on a spending spree lately, this month announcing a plan to spend $88 billion on semiconductor facilities in Europe and $100 billion for U.S. technology education. That’s on top of the $20 billion the company plans to spend on two plants in Ohio. In February, Intel bought Israeli chipmaker Tower Semiconductor for $5.4 billion.

Intel’s comeback plans laid out earlier this year – which included massive spending over the next decade - made investors jittery, sending the company’s stock price down briefly before gaining steam again this month. CEO Pat Gelsinger laid out a vision that would have capital expenditures soar to about 35 percent of annual revenue for 2022-2024, bringing Intel to a negative cash flow this year in the order of $1 billion to $2 billion and dropping gross margins down to 51-53 percent.

“This is absolutely the strategy that will make us successful,” Intel CFO David Zinser said at the Intel Investor Day meeting in February. “There is an investment period to make it successful, but the outcome is significant in both terms of profit and in terms of shareholder value creation.”

ASI Corp.’s Tibbils said acquisitions like Granulate are part and parcel to Intel’s overall strategy. “It’s a very intriguing investment on Intel’s part,” he said.