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Home / Business / How Oracle inadvertently contributed to Nvidia's relinquishing Mellanox from Intel

How Oracle inadvertently contributed to Nvidia's relinquishing Mellanox from Intel



Chip maker Nvidia announced on Monday the biggest acquisition in its history, with the plan to buy Mellanox for $ 6.9 billion in cash.

Mellanox was such a hot feature that Nvidia allegedly prevailed against other bidders, including Intel and Microsoft. The loss of Intel was particularly surprising as David Perlmutter, a board member of Mellanox, was a longtime Intel manager with a 30-year career there. He joined the Mellanox board shortly after retiring from Intel and now works as a VC for Eucalyptus Growth Capital, which specializes in Israeli startups.

Mellanox makes the so-called InfiniBand technology. This is a super-fast networking technology used to connect components in today's largest, faster "supercomputers", also known as High Performance Computing (HPC). It is also used in data centers supporting supercomputers.

Read: Three years after launching their first product, these former Cisco executives sold their $ 405 million startup to Juniper.

This technology was regarded as the next big thing in building faster computers Faster data centers more than a decade ago, possibly even Ethernet as the mainstream standard. But Ethernet has become faster (as always) and InfiniBand has become a niche product for high-performance computing applications. The other major InfiniBand company QLogic acquired Intel in 201

2 for $ 125 million.

InfiniBand looked like it was just going to roll

Paul Sakuma / AP Images

Then two things happened to the future of both companies: Big Data and its child, artificial intelligence. The rise of big data has given companies a more cost-effective way to store and search vast amounts of data for insights.

Artificial intelligence is based on machine learning based on big data. The ML-KI examines a large number of examples of a concept in computers to learn this concept.

Nvidia was pulled into the HPC market when its flagship product, graphics cards (originally designed to enhance video game performance in PCs), was used in these supercomputers to improve their performance.

With the advent of AI, the mighty supercomputers are tackling some of the trickiest AI issues, and Nvidia has found a brand new market for HPC. For example, the fastest computer in the world is an IBM supercomputer known as the Summit. It models supernovas, new materials, cures for cancer, genetics and the environment.

And this one supercomputer uses a cool 27,648 of NVIDIA's GV100 graphics cards as well as 4,600 Mellanox network interface cards, says Nvidia.

Nvidia has entered the AI ​​chip market with a number of specialized products and is now considered the market leader. She has worked closely with Mellanox for years. Nvidia's cards and chips are used in 127 of the top 500 fastest supercomputers in the world, while Mellanox's networking technology is used in 265 of them, says Nvidia.

Meanwhile, at CES in January, Intel has increased competitive pressure on Nvidia by launching its own AI chips to challenge Nvidia's leadership. Intel's Neural Network Processor for Inference (NNP-I) product was developed with the help of Facebook and is scheduled for release in the second half of 2019, reports the Datacenter Knowledge trade news site.

A happy ending for almost everyone. 19659017] When Nvidia learned that Intel was talking to Mellanox, he had no choice but to launch a competing offer: An Intel Mellanox combination would have given Intel a stranglehold on the InfiniBand market. So jumped Nvidia in the offer, reported the Israeli newspaper CTech.

Nvidia says the combined companies are looking at a $ 60 billion market. Had Nvidia lost the contract, Intel, its biggest competitor in AI chips, could have gone with Mellanox and put a near-stranglehold on that $ 60 billion market.

Interestingly enough, this sweet deal for Mellanox shareholders in early 2018 had the pressure of an activist investor. At that time, Starboard was interested in Mellanox, trying to squeeze out all of its directors, and in June, three of its own board members were appointed.

Oracle sold at least half of its stake in Mellanox in this board fight. Oracle bought the 10% stake in Mellanox in 2010 (the days when InfiniBand was considered the next big thing for networking) for around $ 20 per share. Oracle sold its stake for $ 63.90 in 2018. By selling these shares, Oracle leveraged the activist investors who wanted to sell the company, Ronald Orol of The Street reported.

Fast forward to March 2019, and Mellanox officially went for $ 125 a share in cash for Nvidia. It's a happy ending for everyone, except perhaps for Intel.


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