Nvidia Wins Mellanox Stakes for $6.9 Billion

Nvidia buys Israeli chipmaker Mellanox for £5.3bn

Nvidia's rivalry with Intel hits a new stage.

Starting off the week bright and early, NVIDIA this morning announced that they're acquiring datacenter networking and interconnect Mellanox. Mellanox will pay a $350 million termination fee to Nvidia if it accepts a rival offer. Intel reportedly offered $6 billion for the chipmaker.

Data center revenue accounts for almost a third of Nvidia's 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. Nvidia's computing platform and Mellanox's interconnects power more than half the world's Top 500 supercomputers.

With the acquisition, the of Nvidia and Mellanox will have "every major cloud service provider and computer maker" as a customer.

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Calcalist said that Nvidia would have an advantage over Intel in its bid, as it would have a greater chance of getting both United States and Chinese regulatory approvals, given that Intel and Mellanox control the market for InfiniBand technology, a computer-networking communications standard that is used in high performance computers. "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".

Post close, the transaction - for which Goldman Sachs served as financial advisor to Nvidia - is expected to be immediately accretive to Nvidia's non-GAAP gross margin, non-GAAP earnings per share and free cash flow, according to Nvidia. Mellanox also gives Nvidia access to the high-speed networking market.

Nvidia announced at the Consumer Electronics Show in Las Vegas in January an autopilot system for self-driving vehicles called Nvidia Drive.

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

This deal only increases the competitive rivalry between NVDA and INTC to go beyond GPUs to include Infiniband and Ethernet.

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