NVIDIA To Acquire Datacenter Networking Firm Mellanox for $6.9 Billionby Ryan Smith on March 11, 2019 9:45 AM EST
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- IT Computing
Starting off the week bright and early, NVIDIA this morning announced that they’re acquiring datacenter networking and interconnect Mellanox. With a price tag of $6.9 billion, NVIDIA’s acquisition will be vaulting the company deep into the datacenter networking market, making them one of the leading vendors virtually overnight.
Mellanox is not a name we normally see much here at AnandTech, as it’s often a company in the background of bigger projects. Mellanox specializes in datacenter connectivity, particularly high-bandwidth Ethernet and InfiniBand products, for use in high-performance systems. Overall their technology is used in over half of the TOP500-listed supercomputers in the world, as well as countless datacenters. So depending on which metrics you use and how wide you define the market, they’re generally a top-tier competitor or a market leader in the datacenter networking space.
Meanwhile, with NVIDIA’s own datacenter and HPC revenues growing by leaps and bounds over the last few years – thanks in big part to the machine learning boom – NVIDIA has decided to expand their datacenter product portfolio by picking up Mellanox. According to NVIDIA, acquiring the company will not only give NVIDIA leading-edge networking products and IP, but it will also allow them to exploit the advantages of being able to develop in-house the high-performance interconnects needed to allow their own high-performance compute products to better scale.
Like many other companies in the datacenter space, NVIDIA already has significant dealings with Mellanox. The company’s DGX-2 systems incorporate Mellanox’s controllers for multi-node scaling, and on an even bigger scale, Mellanox’s hardware is used in both the Summit and Sierra supercomputers, both of which are also powered by NVIDIA GPUs. So acquiring the company gives NVIDIA some verticality to leverage for future system sales, as well as to further broaden their overall product offerings beyond GPUs.
In fact this will be about the least-GPU-like product in NVIDIA’s portfolio once the deal closes, as all other active NVIDIA product lines are ultimately compute products of some sort. Though to put the size of these businesses in perspective, Mellanox is a fraction of the size of NVIDIA, and so too is their business. Similarly, by 2023 NVIDIA is expecting a $61B total addressable market for compute + high-speed networking – but only $11B of that is networking. So Mellanox’s networking hardware is still one small piece of a much bigger NVIDIA.
As for the deal itself, NVIDIA will be paying $125/share for Mellanox, which is 14% over Mellanox’s previous closing price. Notably, this is going to be an all-cash transaction for NVIDIA; rather than buying out Mellanox’s shareholders with equity in NVIDIA, the company will instead just pay for the company outright via their ample (and growing) cash reserves. Though if reports are to be believed, the timing of this deal was spurred by Mellanox more than NVIDIA – Mellanox had put itself on the market and was supposedly looking at several bidders, so NVIDIA would have needed to spend the cash now if they didn’t want to miss the chance to buy a high-end networking company.
Finally, along with their own vertical integration plans, it sounds like NVIDIA intends to keep the rest of the Mellanox networking business largely status-quo, including keeping the company’s offices in Israel and as well as its existing sales & support infrastructure. Mellanox was already a profitable company – which helps NVIDIA’s own bottom line – so NVIDIA doesn’t necessarily need to change the company’s direction to profit from their new acquisition.
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ksec - Monday, March 11, 2019 - linkSame thought, they were the leader in BSD Drivers. Slightly worry what may come out of it.
HardwareDufus - Monday, March 11, 2019 - linkThis is when average Joes like you and I have should be having an Ah-ha moment.... A datacenter company that none of us has heard of is worth 6.9 billion dollars to a used-to-be-video-card-only manufacturer. Just how much data exists about all of us...
6.9billion is 6900 people all winning a million dollars a piece. a company none of us have heard of is worth more than 6900 millionaires, because it deals in the datacenter biz. Orwell would be proud.
ERJ - Monday, March 11, 2019 - linkAnyone that deals with servers has heard of Mellanox. They are a pretty big deal. If you buy a Dell server your choices of NICs are Intel, Broadcom and Mellanox.
magreen - Monday, March 11, 2019 - linkMaybe so, but 6.9billion is 6,900,000 people all winning a thousand dollars a piece, or 690 people all winning 10 million dollars. Put that way, don't you agree they're corrupting our precious bodily fluids?
HardwareDufus - Tuesday, March 12, 2019 - linkdon't get carried away.. nobody accused anyone of corrupting anything. I was just trying to put 6.9 billion dollars in perspective for readers.
The Orwell comment was just a statement on the enormous presence of big data in our lives....creating tremendous wealth.... and paid for by a company that use to just make cards so that folks could play Duke Nukem better (exaggeration and simplification is intentional...just making for colorful editorial.. ;p ).
rahvin - Wednesday, March 13, 2019 - linkMellanox has been around for a long time, they are one of the companies behind Fiber Channel which as been around for decades. Before 10G ethernet Fiber Channel was one of the only solutions to fast networking, and it's had a lock on SAN's for a long time to the point that only in the last handful of years could you even have a SAN without something like fiberchannel in between. None of this has anything at all to do with Big Data.
If anything Big Data probably doesn't even use this stuff because they tend to use commodity hardware and just dump it into big pools using software and overwhelming oversupply of hardware to compensate rather than buying expensive products like Mellanox sells.
The stuff Mellanox sells is for someone that needs a really fast SAN or network, stuff any moderately sized company needs so their workers can stay busy while having a sane storage and backup system. Nvidia bought them because they had to, otherwise Intel (who bought the only other company in this field recently), would have bought them and locked Nvidia out of a bunch of potential product categories for their GPU's in the server space. There are a ton of articles explaining this out in the financial press. They didn't plan this, it was a covering action to prevent Intel from buying them.
mode_13h - Monday, March 11, 2019 - linkDid you not see that it's (only) 14% over their current share price? I take it you're not well versed in the way companies are valued. I recommend removing your tin foil hat and looking for a good source on the matter.
If this were some loss-making startup, I'd agree that $6.9B is a huge bet. However, it's a different story when you've got an established, profitable company with a growing market and decent margins.
HardwareDufus - Tuesday, March 12, 2019 - linkrelax man. was just saying 6.9billion is allot of money. wasn't calling it a bad investment.
MadManMark - Tuesday, March 12, 2019 - linkYou shouldn't assume that just because you don't know about something, no one else has. I've known about Mellanox for at least a decade.
mode_13h - Monday, March 11, 2019 - linkHmmm... perhaps this is just another way to edge AMD out of the server stack. This move lets Nvidia partner up with IBM or one of the ARM CPU vendors and offer a full stack solution that currently only Intel could counter.