Mellanox Technologies plans to acquire Voltaire, a move that analysts say will reduce the InfiniBand market to a duopoly. According to Mellanox Technologies, the company plans to acquire Voltaire for $8.75 per share, at a total equity value of $218 million. With Voltaire having approximately $40 million cash on hand, this puts the total value of the deal at $176 million.
The acquisition is expected to be finalized in the first quarter of 2011 and to begin providing Mellanox with revenue of 2 to 5 cents per share in fiscal 2011. This deal will also leave QLogic as the remaining competing vendor in the InfiniBand high-performance networking market.
"I see this as yet another example of the big fish eating the smaller fish as the storage and networking space continues to consolidate," said Tom Trainer, founder and president of Analytico, a San Francisco-based consultancy.
QLogic may see the merger as an opportunity to garner incremental market share, according to Paul Mansky, senior analyst for Canaccord Genuity, a San Francisco-based investment firm. "When most markets, particularly smaller markets, consolidate down to two vendors, they tend to be 80-20 [percent] markets pretty quickly," says Mansky, who also estimates that current market share percentages are 50 percent for QLogic, 30 percent for Mellanox, and 20 percent for Voltaire. QLogic and Mellanox/Voltaire will be competing to see which will be the "80" and which will be the "20," according to Mansky.
Mansky also says that, ultimately, InfiniBand may end up being invisible to most users, as it is increasingly being adopted in the appliance-based market. For example, Oracle, which uses InfiniBand technology in its database appliances, announced in October that it was acquiring 10.2 percent of Mellanox for an undisclosed price.
