Today, Mellanox announced plans to buy Voltaire for $218M. This is not a surprising move – Voltaire was a customer of Mellanox InfiniBand silicon yet the two companies often were competing head-to-head in the switch market which was driving down the price of both of their businesses. I heard that OEM customers had been pushing for this marriage of companies for some time so that they can join forces on the low latency marketplace. Voltaire has a Low-Latency Ethernet product which does not use Mellanox silicon, but I would expect that it will convert to the in-house solution in the future. While the InfiniBand market has had good growth, consolidation of the supply chain makes sense, vertically integrating to suppliers that provide chips, adapters and switches. QLogic went from a customer of Mellanox to a competitor with the acquisition of SilverStorm in 2006. Mellanox is the lead supplier of InfiniBand chip technology and now with Voltaire being acquired by Mellanox, we have a horse race with QLogic as the other end-to-end InfiniBand solution provider from chips and switches.
A month ago, Oracle made a strategic investment purchasing 10% of Mellanox shares. In the video clip below, Dave Vellante and Steve Kenniston discussed the impact of Oracle’s presence on Mellanox relationships. Mellanox lists IBM, HP, NetApp, Isilon (which is being acquired by EMC), and Dell among its hardware OEM customers.
If I’m a competitor of Ellison [Oracle], what does Ellison want to do to me? He wants to squash me. He now has 10% of a key technology which you rely upon [Mellanox], so you should think about finding second sources of your InfiniBand technology. -Dave Vellante
Vellante’s point is worth noting if you’re an OEM customer of Mellanox and a competitor of Oracle’s. Specifically, Oracle is positioned to potentially gain priority access to future Mellanox technologies, or at the very least ‘cut the line’ when it comes to Mellanox integration priorities. If Ellison is betting on InfiniBand – which he is – it seems obvious that he’s positioning to gain competitive advantage. As well, he’s putting Oracle in a position to block the sale of Mellanox to a potential competitor or perhaps even get in the business himself. While the latter option is less likely as Steve Kenniston points out in the video, no one expected Ellison to purchase Sun Microsystems.
The lone competitor to Mellanox in the Infiniband space is QLogic and just as QLogic has benefited in the FC switch market from OEM concerns over competition from Cisco and Brocade it could find support from Mellanox customers. Specifically, customers that are reliant on Mellanox may become increasingly concerned over the company’s close ties to Oracle and begin to funnel business to QLogic to essentially fund a viable second source of IB technology. We’ve seen QLogic play a smart hand in the FC space and as InfiniBand goes increasingly mainstream QLogic’s customer base becomes a greater asset as it will be able to cross sell more effectively. QLogic has been trailing Mellanox in the market for quite some time but the investment by Oracle may have an ironic impact to bolster QLogic’s position.
The market for low-latency solutions is moving beyond the traditional HPC (high performance computing) market to broader cloud applications and specifically supporting so-called big data environments. InfiniBand and Ethernet technologies will continue to battle for OEM design wins and customer sales. Overall, I won’t bet against Ethernet being the ultimate winner (and you see Mellanox/Voltaire both moving into this market), but InfiniBand is having a small resurgence with a growing number of solutions (not just announcements at SuperComputing conferences) which utilize IB. Mellanox will face increased competition as it expands beyond InfiniBand to Ethernet where it will face Cisco and Arista. As Oracle’s investment shows, low latency interconnect technology is an important piece of the overall infrastructure; independent technology companies like Mellanox and QLogic have an opportunity to help companies deliver next generation high-speed, low latency architectures.