Having weathered the post-bubble drought, chip vendor Dune Networks has secured itself a new home by agreeing to be acquired by Broadcom Corp. (Nasdaq: BRCM) for $178 million.

The deal, announced late yesterday, is expected to close before March 31. (See Broadcom to Acquire Dune Networks.)

Dune makes switch fabric chipsets, which are integral to any packet-carrying system. In fact, the switch fabric architecture is one of the earliest decisions in any design, and it's usually hard to change that decision once the product design is well underway. That's one of the ways Dune, which emerged circa 2000 along with a bevy of network-processor startups, kept alive all these years. (See Dune: They're Still Alive.)

Broadcom snapped up another of those startups, Sandburst, in 2006. Sandburst designed network processors and switch fabrics that Broadcom continues to sell. (See Broadcom May Scoop Sandburst and Broadcom Builds on Sandburst.)

So, what made Dune suddenly attractive after all this time? [Ed. note: apart from the sand...]

Its architecture turns out to scale further, to potentially hundreds of terabits per second, while Sandburst probably loses steam somewhere in the tens of terabits per second, says Jag Bolaria, an analyst with The Linley Group .

Broadcom officials say that kind of scale will be a necessity as cloud computing spawns more ambitious plans for future data centers.

"It's become very clear that the scalability needed for that market is very significant -- hundreds of terabits of switching capacity. That's something that maybe wasn't clear years before," says Martin Lund, vice president of Broadcom's network switching business. "The Sandburst architecture was tailored for metro Ethernet, but not for the data center."

The issue is that Sandburst's architecture is centralized. As more ports begin sending more traffic through the switch, the fabric needs to make more configuration decisions, putting an upper limit on how much traffic it can handle. (Granted, that limit is somewhere in the tens of terabits per second.)

Dune, on the other hand, built an architecture that reconfigures itself on the fly. "Inherently, it scales much better, and it can do multistage architectures much better," says Bolaria.

On the business side, Dune claimed to have secured design wins with nearly every major vendor, with Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR) the standout exceptions: Those two still boast of having their own chip designs inside routers and switches. (See Chipping Away at Cisco's ASR 9000 and Juniper Takes Over the Network.)

Not having those IP giants on board has limited Dune's revenue prospects: Bolaria figures the 100-employee company is probably generating annual revenues of $40 million to $50 million. (Dune also claims it's going to be profitable this year -- see Dune Predicts a Profit.)

That might change soon, and for the better -- not because Dune is getting tucked under Broadcom's wing, but because Ethernet switch prices keep getting driven down, a trend that might influence Cisco and Juniper's plans.

"Cost is going to be a bigger factor," Bolaria says. "I think they [Cisco and Juniper] will be looking to see if there are any merchant suppliers that can scale that far up."

— Craig Matsumoto, West Coast Editor, Light Reading