Chip maker Nvidia announced the biggest acquisition in its history on Monday with the plan to buy Mellanox for $ 6.9 billion in cash.
Mellanox was such a good property that Nvidia allegedly won over other bidders, including Intel and Microsoft. Intel's loss was particularly surprising since one of Mellanox's directors, David Perlmutter, was a long-standing Intel leader with a 30-year career there. He joined the Mellanox Board shortly after retiring from Intel and is now working as a VC for Eucalyptus Growth Capital specializing in Israeli startup.
Mellanox does what is called InfiniBand technology. These are superfast network technologies used to connect components in today's largest, faster "supercomputers", otherwise known as HPC (High Performance Computing). It is also used in data centers that support supercomputers.
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This technology was considered the next big thing in building faster computers and faster data centers more than a decade ago, possibly even replacing Ethernet by default. But Ethernet was faster (as always) and InfiniBand became a niche product for high-performance applications. Intel acquired the second major InfiniBand company, QLogic, in 201
InfiniBand looked like it would just be anywhere on the vine
Then there were two things to change both companies' futures: big data and their child, artificial intelligence. The rise of large data meant cheaper ways for businesses to store and sift through huge amounts of insight data.
Artificial intelligence depends on machine learning based on large data. ML AI is where computers study a large number of examples of a concept to learn that concept.
Nvidia was pulled into the HPC market when its flagship product, graphics card (originally created to enhance video game performance in PCs) was used in these mammoth supercomputers to improve performance.
With the rise of AI, these fierce supercomputers take some of the most sparkling AI issues, and Nvidia found a brand new market in the HPC. For example, the world's fastest computer is an IBM supercomputer known as the Summit. It models supernovae, new materials, cures for cancer, genetics and the environment.
And this one supercomputer uses a cool 27,648 of NVIDIA's GV100 graphics card, as well as a 4,600 Mellanox network interface card, Nvidia says.
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Nvidia first pigeons into the AI chip market with a number of specialized products, and is now considered market leader. It has worked closely with Mellanox for many years. Nvidia's cards and chips are used in 127 of the top 500 super computers in the world, while Mellanox network technology is used in 265 of them, Nvidia says.
At the same time, at CES in January, Intel increased the competitive pressure on Nvidia by launching its own AI chips to challenge Nvidia's management. Intel's Nervana Neural Network Processor for Inference (NNP-I) product was created with Facebook help slated for release in the second half of 2019, reports the Datacenter Knowledge Trade News site.
A Happy End for Almost Everyone  When Nvidia found that Intel was negotiating to buy Mellanox, it had no choice but to launch a competing offer: An Intel-Mellanox combination would have given Intel a string team on the InfiniBand market. So Nvidia jumped into the bidding, reported the Israeli newspaper CTech.
Nvidia says the combined companies are looking at a $ 60 billion market. Had Nvidia lost its bid, Intel, its biggest competitor in AI chips, could go with Mellanox and add a close game of wrath to the $ 60 billion market as well.
Interestingly, this sweet deal for Mellanox shareholders was rooted in pressure from an activist investor at the beginning of 2018. It was when Starboard took an interest in Mellanox, tried to pour out all its directors, and in June he managed to get three of their own board members appointed.
When this board game took place, Oracle sold at least half of its stake in Mellanox. Oracle acquired 10% stake in Mellanox in 2010 (the days when InfiniBand was considered the next major network case) of around $ 20 per share. In 2018, Oracle sold its $ 63.90 stake. By selling these shares, Oracle gave dividends to the activist investors who wanted to sell the company, Ronald Orol reported on The Street.
Until March 2019 and Mellanox have officially gone to Nvidia's open arms for $ 125 per share in cash. It's a happy ending for everyone, except maybe Intel.