Published: Tue, March 12, 2019
Money | By Bruce West

Nvidia believed mulling Mellanox bid

Nvidia believed mulling Mellanox bid

The company had a market capitalization of about US$5.9 billion at the end of trading on Friday.

The deal, which is Nvidia's largest to date, reportedly saw the firm topple a $6bn bid made by Intel.

Mellanox had 2,330 full-time employees and 116 part-time employees as of the end of past year, according to a filing with the U.S. Securities and Exchange Commission.

Nvidia will acquire all issued and outstanding common shares of Mellanox for $125 per share in cash.

The tie-up also builds on efforts at Nvidia and Mellanox to get out of the cutthroat business of selling chips and into the more profitable business of selling complete systems, said Bob Wheeler, a principal analyst at chip research firm The Linley Group. The company has been pushing its technology into new areas, arguing that it has the best solution to the tougher requirements of processing data related to artificial intelligence. "Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine". Rival Intel would have faced challenges as it along with Mellanox are dominant suppliers of InfiniBand technology, a networking standard commonly used in supercomputers.

Multiple companies have an interest in adding such capabilities to their own products as they try to court major buyers of servers and other computer infrastructure, such as Alphabet Inc.'s Google, Amazon.com Inc. and Microsoft Corp.

This is being seen as a cunning plan to reduce Nvidia's dependence on the video game industry.

Mellanox's revenue surged 26 per cent past year, topping US$1 billion for the first time.

Data centre revenue accounts for almost a third of Nvidia's sales.

Huang said Nvidia studied carefully how the deal would be reviewed by regulators and believed it wouldn't face significant hurdles because the two companies are complementary.

Goldman Sachs served as exclusive financial adviser to Nvidia, while Credit Suisse Group and JPMorgan Chase & Co. advised Mellanox.

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