Update: NVIDIA buys Mellanox for $6.9 Billion
Update: NVIDIA buys Mellanox for $6.9 bn, complete terms of the sale are still developing.
Mellanox Technologies Inc.(NASDAQ:MLNX) is a networking company specializing in fast interconnects for datacenters. Their focus on datacenter networking uses various technologies including Ethernet, InfiniBand/VPI to Multi-Host depending on customer requirements. While normal consumers might now know them well, last fiscal year they generated over $1 bn in revenue across their enterprise networking business. As high-performance workloads have become more parallel, the need for increasingly faster interconnects between servers has been required, and as such Mellanox revenue and stock has risen accordingly. Mellanox has headquarters in the United States and Israel, with the overwhelming majority of their 2700 employees at their Israeli facility.
The Bidding War
Since October there has been increased interest from other companies to takeover Mellanox, and as such their stock has risen from around $65 per share to the current $110, putting their market cap at about $6 bn. It is widely believed that Intel Corporation (NASDAQ:INTC) is another serious prospective buyer with a bid arriving at roughly $6 bn a few weeks ago. The stock has since shot up making the value approximately $ 6 bn for the company if Intel is serious about acquiring the company they would need to substantially increase their offer as acquisitions require a premium on the trading price. The acquisition from Intel would make a lot of sense geographically as Intel’s operations in Israel already employ almost 13,000, while NVIDIA Corporation (NASDAQ:NVDA) comparatively has a research center in Israel employing 12 people, mostly for support of local tech companies. It should also be noted that Intel is worth roughly 2.5 times more than NVIDIA and would likely have an easier time justifying the purchase, especially considering NVIDIA's most recent quarter.
The acquisition from either Intel or NVIDIA makes perfect sense for both companies’ play for the datacenter market, as integrating a high-speed network component into either companies platforms would give them an advantage. Intel currently has ethernet and optical networking expertise, but with nothing comparable to Mellanox’s 400GbE transceivers which were recently demoed. While Calcalist’s souces estimate Intel’s bid at $6 bn and NVIDIA at $6.6 bn, CNBC claims the bid from NVIDIA is over $7 bn for the company, which would be in line with a typical premium offered for a company in a takeover. They also say the announcement could be as early as Monday morning if Mellanox accepts the offer. If successful this would be a good first step for NVIDIA to diversify their revenue further away from gaming which is more susceptible to market cycles than enterprise.