merger

Mellanox drives NVIDIA into the Data Center

Posted on by Techtime

Above: Eyal Waldman, CEO and President of Mellanox (left) and Jensen Huang, founder and CEO of NVIDIA

The $6.9 billion merger between Mellanox and NVIDIA which was completed in April 2020, proved to be a successful move: Mellanox is an expert in high-speed Ethernet and InfiniBand networking solutions for Data Centers and High Performance Computers. NVIDIA invented the GPU back in 1999, and transformed itself from a provider of graphical boards into a powerhouse in High Performance computing and Artificial Intelligence, based on its expertise in GPUs.

This newly wedded couple produced an excellent financial quarter in Q2 2020: Record revenue of $3.87 billion, up 50% from a year earlier, and record Data Center revenue of $1.75 billion, up 167% compared to Q2 2019. Mellanox contributed approximately 14% of company revenue and just over 30% of data center revenue. In fact, Mellanox’ own sales grew 26% under the umbrella of NVIDIA to a record of $541 million.

“That’s why we bought Mellanox”

Mellanox also played an important role in NVIDIA’s strategy to break into the data centers market. “Mellanox grew sharply, driven by the need for high-speed networking in cloud data centers to scale-out AI services,” said Jensen Huang, President and Chief Executive Officer of NVIDIA. “We recognize the importance of high-speed networking and low-latency networking, and that’s why we bought Mellanox.”

Colette Kress, Chief Financial Officer of NVIDIA said during a conference call earlier this week, that NVIDIA and Mellanox powers two-thirds of the top 500 Super Computer systems in the world,  compared with just less than a half in total two years ago. “And just this morning, Microsoft Azure announced the availability of massively scalable AI clusters, which are based on the A100 and interconnected with 200-gigabyte-per-second Mellanox InfiniBand networking.”

Mellanox' ConnectX-6 Dx Dual 100GbE / Single 200GbE SmartNIC for Advanced Cloud
Mellanox’ ConnectX-6 Dx Dual 100GbE / Single 200GbE SmartNIC for Advanced Cloud

The overall strategy is well defined: “The combination of NVIDIA accelerated computing, Mellanox networking, and Cumulus software (Acquired in May 2020) – enables data centers that are accelerated, disaggregated, and software-defined – to meet the exponential growth in AI, cloud, and high-performance computing.”

Growth to continue in Q3 2020

Jensen sees more sales in the near future. “Despite the pandemic’s impact on our professional visualization and automotive platforms, we are well positioned to grow, as gaming, AI, cloud computing and autonomous machines drive the next industrial revolution,” he said, and expects Q3 2020 revenue to be $4.40 billion, plus or minus 2%.

Why? Because “Two components, two types of technologies are really important to the future of cloud. One of them is acceleration, and our GPU is ideal for it. And then the other one is high-speed networking. That transition is called east-west traffic. And the most important thing you could possibly do for yourself is to buy really high-speed, low-latency networking. And that’s what Mellanox is fantastic at.”

Gilat-Comtech Merger becomes Forced Marriage

Posted on by Techtime

Gilat Satellite Networks announced it intends to file a counterclaim against Comtech, demanding to enforce the $577 million Merger Agreement signed on January 2020, or otherwise determine financial compensation to the amount of hundreds of millions of dollars. Gilat’s threat comes after Comtech recently filed an amended complaint with the Delaware Court of Chancery, in which it has already asked quite explicitly from the Court to withdraw from the Merger Agreement with Gilat, which was in advanced stages of regulatory approval.

In its statement, Gilat said that it was aware that Comtech’s amended complaint requests an additional declaratory judgment which will confirm that due to COVID-19, Gilat has suffered a “Material Adverse Effect”, and therefore Comtech was not required to complete the merger. Gilat reacted sharply, “strongly rejects all these allegations,” claiming that Comtech’s complaint “is nothing short of an attempt to avoid its clear contractual obligation to acquire Gilat, due to Comtech’s own rapidly deteriorating performance.”

Exploiting the Russian Regulator

The initial complaint filed by Comtech concerned changes made by Gilat in its Russia-based subsidiary, which, according to Comtech, could have undermined attempts to receive approval from the Russian Monopoly Service (FAS). Gilat claims that it was only a pretext sought by Comtech in order to annul the Agreement, and whoever sabotaged attaining Russian approval was in fact Comtech: “Gilat believes that Comtech has willfully breached its obligations under the Merger Agreement so as to attempt to ensure that FAS approval is not timely obtained and Comtech will not be required to consummate the merger.

Gilat said in a press release that it intends to file a counter claim against Comtech seeking, “among other things, a declaration that Comtech cannot terminate the Merger Agreement and, if the merger is not consummated, Comtech should pay Gilat monetary damages for all losses that Gilat and its shareholders and option holders have suffered, which Gilat will assert amount to hundreds of millions of dollars.”

COVID-19 hit both companies

Gilat Satellite Networks provides satellite-based broadband communications, including a cloud based VSAT network platform, high-speed modems, high performance on-the-move antennas and high power Solid State Amplifiers (SSPA) and Block Upconverters (BUC). During Q1 2020, Gilat’s sales totaled $47.7 million, compared to $62.1 million in Q1 2019. The company said that the decline in sales was a result of the effects of the COVID-19 pandemic, mainly due to sharp decline in passenger aircraft market (Inflight Connectivity).

Comtech’s business situation is no different: for the quarter ended April 2020, it reported a 17% drop in sales to $135.1 million, also due to the COVID-19 pandemic. As a result, it was forced to take action to reduce expenses, including a 10% reduction in the workforce and a reduction in wages.