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Mellanox Snaps Up Voltaire, Peers Ahead to an End Game?

Today's news that networking specialist Mellanox Technologies is acquiring its smaller rival Voltaire should be positive news for their customers in the financial markets. For those that are supporters of InfiniBand, the merger makes for a bigger company to innovate in that direction. More generally, the combined company will have a strong place in both Ethernet and InfiniBand, as it looks to wire up data centres for everything from low-latency trading to cloud computing - and perhaps be acquired itself down the road?

Just to review the financials ... Mellanox's revenues in the 12 months to September 30 were about $150 million, while Voltaire's were around $68 million. So combined revenues amount to $218 million - just about the same as Voltaire's sale price (which came with $42 million in cash).

Basically, both companies are growing and doing pretty well (though Voltaire is not profitable), but they stand to do better as a bigger combined company, especially as they look to push into the more mainstream Ethernet space, where the likes of Cisco Systems and now IBM (which just closed on its acquisition of Blade Network Technologies) are rivals.

In the InfiniBand world, combining forces will allow them to compete against the likes of QLogic. Mellanox doesn't break out its business by verticals (sigh) - and indeed overall it gives an impression of being pretty horizontally product focused. Among other things, it actually produces the requisite silicon used in its products, and by others, including Voltaire.

For its part, Voltaire has taken a strong interest in vertical business development, and reckons financial services accounts for about a third of its business. Both companies began their lives in the InfiniBand world (and both in Israel), though they have each introduced Ethernet products, with Voltaire leading the way in that direction.

While Mellanox has focused on network interfaces for servers and storage, Voltaire's focus has been on switches. Thus, combined, they are combining strong complementary businesses. Financial markets firms have benefited from both companies' introduction of RDMA transports across InfiniBand and Ethernet, and the low latency and deterministic performance they bring. And Voltaire's VMA acceleration software is used by many messaging vendors, including Informatica (that's 29West as they will soon be known) and NYSE Technologies.

As to the future, it's going to be more and more a game for the big guys, as networking is being increasingly sold as components of unified stacks, also combining compute servers and storage. That's the focus of Cisco, IBM and HP. And of Oracle, which happened to buy a 10% stake in Mellanox at the end of October, for "investment purposes" it says, though it acknowledges the strategic relationship that Mellanox plays in creating its new range of appliances, such as Exalogic. And networking is the one piece of those appliances that it does not own. Yet.

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