SAN JOSE, Calif. - In a major move, Oracle Inc. has made a strategic investment in Mellanox Technologies Ltd., a supplier of InfiniBand-based chip technology.
Database giant Oracle has acquired 10.2 percent of Mellanox's ordinary shares in the open market. Oracle claims it has no plan or intention to make an unsolicited and unfriendly offer to take over Mellanox.
Mellanox said it is expected to continue to work with all technology vendors, in addition to Oracle, such as Dell, HP, IBM, and others, to maximize the usage of InfiniBand as the preferred data center communications fabric.
Oracle, by way of Sun, and Mellanox have had a long-term strategic partnership that allows Oracle to leverage Mellanox's InfiniBand products to create differentiated Oracle solutions like Exadata and Exalogic. Mellanox said igt intends to make Oracle Solaris a core supported operating system platform to help meet increasing customer demand.
"InfiniBand is by far the fastest and most efficient switch fabric for running enterprise data centers," said Oracle CEO Larry Ellison, in a statement. "Mellanox has been instrumental in maintaining InfiniBand's immense competitive lead over Ethernet. We are a big supporter of the company and this investment based upon our belief in the InfiniBand technology and in the Mellanox management team."
"Mellanox has had a long standing relationship with Sun, and now Oracle, that goes back over eight years," said Mellanox CEO Eyal Waldman. "We are pleased that Oracle has chosen to make this strategic investment in Mellanox and look forward to an expanding partnership that will maximize the potential of InfiniBand."
At Oracle recent annual meeting, the database company said it may buy or invest in a chip maker. At the time, Ellison made the surprising announcement, saying he wants to bolster the company’s hardware business. Earlier this year, Oracle completed the purchase of server manufacturer Sun Microsystems Inc.
Well, in my view, it is wrong to conclude that Oracle has purchased Mellanox. Oracle has merely purchased 10.2% of Mellanox ownership, that again in the open market, which does not appear to be a buy out of Mellanox by Oracle.
However, in addition to being a demonstration of Oracle’s power, this move does have a two-fold effect. On one hand it gives additional leverage for Oracle to maneuver if another player tries to take over Mellanox. On the other hand, this gives an incentive for Mellanox to be especially accomodating of Oracle’s market needs and perhaps, gives Oracle, themselves, the opportunity to effect a unsolicited take over if the Mellanox gets too friendly with Oracle’s competitors.
Besides, who wouldn’t want to invest in a strong player in InifiniBand which appears to be the next big thing after Ethernet? This may be an investment in its literal meaning.
Oracle, like IBM and others, has a big stake in Infiniband and Mellanox is the only company making chips for it. Infiniband will never big as big as Ethernet, and Mellanox has been embracing Ethernet products to fuel its growth. I keep wondering why Mellanox has not gone public.
Yes, Mellanox has already gone public. It is in the open marketplace that Oracle has purchased Mellanox stocks.
Speaking on Infiniband, I agree with Rick. Inifiniband might not grow as large as Ethernet or as so widely establshed as Ethernet. But definitely Mellanox has promise to grow bigger and more profitable in the medium term. Since Mellanox enjoys a significant market share in Infiniband switching products, it may at present and it will most definitely in the future, be able to earn super-profits. While ackonwledge the strategic motives as playing a part, this is the reason why I argue that the Oracle’s investment in Mellanox can be a plain-old investment for the sake of being profitable?
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