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December 19, 2018

Microsoft Seeking Mellanox Acquisition, Appoints Goldman Sachs to Advise: Reports

Xilinx has also been linked with an acquisition amid hedge fund pressure

By CBR Staff Writer

Microsoft is the latest company rumoured to be looking closely at an acquisition of Israeli chip, server and switchgear specialist Mellanox, as a global semiconductor consolidation continues.

Microsoft is a key client of Mellanox products, and sees an acquisition as a way to strengthen its services in cloud computing, Israel’s TheMarker said, in a Hebrew language report Wednesday.

Leapfrogs Xilinx in Race for Switchgear Specialist?

Early last month, meanwhile, CNBC cited sources as saying US chipmaker Xilinx had hired Barclays to advise on a bid to acquire $5 billion Mellanox after approaching the chipmaker with an offer.

The Marker meanwhile claims Goldman Sachs has been appointed to advise the deal for Microsoft, in a bid to muscle out a $100/share offer allegedly made by FGPA specialist Xilinx in November.

Microsoft Mellanox

A Mellanox 648-Port InfiniBand Director Switch. Credit: Mellanox

The Israeli company has been under pressure to sell its business from activist hedge fund Starboard Value LLP, which owns a 10.5 interest in the company. This July it forced three directors off Mellanox’s board, installing candidates it backed.

Peter Feld, a Managing Member of Starboard, said at the time the company has “potential for future growth and significantly higher profitability.”

What does Mellanox Do?

Mellanox sells networking hardware used in data centers, including Ethernet switches, where Cisco rules the market, and cables for connecting switches to other hardware.

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As well as Microsoft, Mellanox also provides products for Dell and HPE, to name some of its larger clients, with products ranging from cables to its system-on-a-chip (SoC) family BlueField.

It names Chinese giant Alibaba as among its major new client wins, early December saying its RDMA over Ethernet (RoCE) 25Gbps ConnectX “RoCE” network adapters have  been deployed in Alibaba Infrastructure Services’ production network.

Mellanox in October reported record quarterly revenue of $279.2 million, up 24 percent, year on year.

See also: You May Say It’s a Dreamer…” Microsoft Demands Digital Peace


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