Nvidia nears deal to acquire Mellanox Technologies

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The company is known for producing high-speed networking components using Ethernet and InfiniBand. Nvidia reportedly outbid Intel the for the company.

In January, Nvidia, which has market capitalization of $91 billion, cut its fourth quarter revenue estimate by half a billion dollars because of weak demand for its gaming chips in China and lower-than-expected data centre sales.

Bernstein analyst Stacy Rasgon said Nvidia has been pushing more into networking and connectivity with its own tailored solutions and Mellanox would bring further expertise.

A report on the technology website for the Israeli daily newspaper Calcalist claims that Nvidia has shown a firm interest in acquiring Mellanox Technologies. It is believed that Nvidia Corporation (Nasdaq: NVDA) has joined the list of candidates to buy Mellanox, alongside Intel, Xilinx, and Microsoft, which have been touted as possible buyers in the past.

In the press-statement about the acquisition Nvidia's Jensen Huang talked about how excited he was to be able to combine Nvidia's and Mellanox's talents and technologies to create holistic compute/networking architectures "to form a giant datacenter-scale compute engine".

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The deal will expand the offerings of Nvidia, which produces chips and other technologies for video games, facial recognition systems and autonomous vehicles.

Mellanox will be accretive to Nvidia's non-GAAP earnings and cash flow. Mellanox will play a role in Nvidia's supercomputing, data centre and cloud service initiatives.

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

In Intel's case, the tech giant was likely looking to "corner the market" with its bid as Engadget.

Analysts were upbeat on the purchase. With a price tag of $6.9 billion, NVIDIA's acquisition will be vaulting the company deep into the datacenter networking market, making them one of the leading vendors virtually overnight. It will also foster the next generation of HPC and AI platforms for hyperscale and enterprise datacenters, as well as supercomputing centers.