NVIDIA buys high-performance chip-maker Mellanox for $6.9 billion


It could, however, face some regulatory hurdles in China, where Mellanox has major customers such as Alibaba and Baidu.

If you aren't that familiar with Mellanox, its strength is in high-performance interconnect technology.

And Shebly Seyrafi, an analyst at FBN Securities, agrees that the unit will provide broad solution sets to overcome bottlenecks in the data-center market.

"This could reinvigorate M&A discussions across the entire sector".

The companies have a record of joint collaboration, such as their contributions to the world's two fastest supercomputers, the U.S. Department of Energy's Sierra and Summit systems built by IBM.

"They're in the networking business, and networks are interoperable". Currently, about 25% of Nvdia's sales go into data centers. The company develops a number of products which overlap with Mellanox's offerings. The second is that the cost and difficulty of development and production work in favor of the strong players, and thus encourage a trend of mergers and acquisitions as a condition for survival.

Intel has declined to comment on reports that it is seeking to acquire Mellanox.

Xilinx Inc was also part of the process, sources said. This was blamed partly on decreased revenue from data centers, which is an area Mellanox specializes in.

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Then Nvidia entered the picture.

The deal would be the biggest M&A transaction in the semiconductor industry since Renesas Electronics agreed last September to acquired Integrated Device Technology (IDT) for around $6.7 billion in cash, a deal that is expected to close later this year. The deal is the largest in Nvidia's history. Meanwhile Eyal Waldman, founder and CEO of Mellanox talked about how the two companies share the same vision.

Nvidia's rivalry with Intel hits a new stage.

With the acquisition of Mellanox, NVIDIA will be able expand in those areas. Once complete, the combination is expected to be immediately accretive to NVIDIA's non-GAAP gross margin, non-GAAP earnings per share and free cash flow.

The idea of Microsoft as a potential buyer for Mellanox came from yet another place.

Market value of Israeli chipmaker Mellanox Technologies. Nevertheless, Nvidia's motivation seems to have been stronger and clearer. Both Intel and Nvidia already have business operations in Israel, so it would make sense for either rival to acquire a firm that could easily align with their current development programs.

So, what would Nvidia do with a networking company? According to NVIDIA, there is an "enormous market opportunity" for computing and high-speed networking, with the total addressable market being worth $60 billion or more by 2023.

The more important thing readers may be looking to read in this piece and what does matter is "The Why?"