Intel Absorbs XML Startup

Having invested in at least two XML acceleration companies, (Nasdaq: INTC) is bringing some of the technology home with the acquisition of Sarvega Inc.

Intel's venture arm, Intel Capital, had previously invested in Sarvega, a privately held XML switch vendor founded in 2000. Intel Capital also holds a stake in Tarari Inc., an Intel spinoff that sells XML acceleration chips (see Sarvega Accelerates XML and Intel Spinoff Targets XML, Viruses).

Terms of the Sarvega sale were not disclosed. All of Sarvega's roughly 50 employees will be joining Intel.

The deal brings Intel directly into the battle to develop chips and software for Layer 7 traffic processing, facing competitors such as DataPower Technology Inc., Solace Systems Inc., Sonoa Systems Inc., and Xambala Inc.The concept has also attracted (Nasdaq: CSCO), which launched its Application-Oriented Networks (AON) platform in June. (See Telecom Startups Play in XML, Cisco Set to Detail XML Strategy, and Cisco Speaks Applications.)

Intel intends to continue selling and supporting Sarvega's appliances. Beyond that, details are sketchy. "The reason we acquired Sarvega was the strategic importance of the technology they provide," is all an Intel spokesman would offer.Sources say Sarvega was prompted to sell because it was running out of cash, but that's not the case, says Peter Borbely, Sarvega's vice president of marketing. "We had a fairly solid business plan taking us forward," he says, adding that Sarvega was not even in the hunt for another round of funding.

Not including the Intel Capital contribution, Sarvega has raised $20 million in two rounds, the most recent being in June 2003 (see Sarvega Secures $10M Funding). Investors in that round included Bessemer Venture Partners,

ComVentures, InterWest Partners, and KB Partners.

Craig Matsumoto, Senior Editor, Light Reading

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