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Oracle takes stake in networking pal Mellanox

Time for HP to pounce

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When Oracle co-founder and chief executive officer, Larry Ellison, hinted a month ago that he was interesting in making investments in chip companies, he wasn't kidding. Today, InfiniBand chip and switch maker Mellanox, which also makes InfiniBand and Ethernet host adapter cards, announced that Oracle has snarfed up a 10.2 per cent stake of the networking company.

"This stake is for investment purposes only, to solidify common interest in the future of InfiniBand," Mellanox explained in a statement. "Oracle has no plan or intention to make an unsolicited and unfriendly offer to take over Mellanox."

The networking company was quick to point out that it planned to continue to work with other InfiniBand partners, such as Dell, Hewlett-Packard, and IBM to "maximize the usage of InfiniBand as the preferred data center communications fabric."

Mellanox was the chip and adapter supplier to Sun Microsystems, which was acquired by Oracle in January of this year for $7.4bn. Sun's "Magnum" monster InfiniBand switch, which had a stunning 3,456 ports and which was at the heart of the "Constellation" supercomputing and media streaming cluster designed by former Sun server CTO Andy Bechtolsheim and launched in 2007, used Mellanox chips. (That Constellation system, with its Opteron blade servers, was designed to reach 2 petaflops of aggregate performance).

So do the follow-on switches now sold by Oracle, the Sun Datacenter InfiniBand Switch 648, Switch 72, and Switch 36. Those numbers in the switch names are the switch port count for those devices and they use Mellanox chips for chucking data around at quad-data-rate (QDR or 40 Gb/sec) InfiniBand speeds. The Magnum was based on slower DDR (20 Gb/sec) InfiniBand chips and is no longer pushed hard by Oracle. (You could probably get one if you really wanted it, since it is still, technically speaking, part of the product catalog).

Ellison had nice things to say about InfiniBand, which is at the heart of Oracle's Exadata data warehousing and online transaction processing appliances as well as its Exalogic Web application middleware appliances. (And despite the fact that Oracle has pretty much lost interest in the HPC and media serving customers that the Constellation product was designed to appeal to).

"InfiniBand is by far the fastest and most efficient switch fabric for running enterprise data centers," Ellison said in the 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."

Neither Oracle nor Mellanox disclosed how much Oracle paid for its 10.2 per cent slice of the networking company's outstanding shares. With Mellanox shares trading at $22.41 a pop and 33.7 million shares outstanding, Oracle's stake is valued at $73.1m. If anything, the deal assures that Oracle is now absolutely in the loop on future product plans Mellanox has for InfiniBand and also is probably going to get in the front of the line for new products and possibly preferred vendor pricing. And any time Oracle feels like it needs to, Ellison can whip out the Oracle checkbook and buy the remaining 89.8 per cent.

As El Reg goes to press, Mellanox has a market capitalization of $717m. The company has $149.5m in revenues and $18.3m in net income for the trailing twelve months and it would probably fetch at least $1bn if someone tried to buy it, and maybe a bit more. Someone might want to do that if they wanted to upset Oracle's teacart. Like a disgruntled HP that is getting a little sick of Ellison's sass and that doesn't have an InfiniBand networking business. Yet. ®

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