Feeds

Mellanox goes to Wall Street for cash

Chests filled for war and development

Build a Business Case: Developing Custom Apps

Updated InfiniBand and Ethernet networking chip and equipment maker Mellanox Technologies announced after the market closed in New York on Monday that it would be issuing up to 3 million shiny new shares to raise some cash for working capital and strategic investments.

The offering, which has J.P. Morgan Securities, Credit Suisse Securities, and Barclays Capital doing the book running, will also allow Mellanox to kick out another 450,000 shares after 30 days in the event that Wall Street has an appetite for the stock. This will raise Mellanox' share count by 9.7 per cent and dilute the shares by 8.5 per cent – something that may not make investors happy.

In a supplemental S-11 shelf filing Mellanox said that it had 137.1 million ordinary shares authorized by its board, with 35.9 million of them having been floated to the public. The filing also indicates that software and server maker Oracle and Fidelity Management and Research together own 22 per cent of the outstanding shares in Mellanox and that company officers and directors have an aggregate of 29 per cent of the shares – giving this block of shares control of the company, with 51 per cent. With the 3 million new shares, plus the potential for 450,000 more, this block (assuming it thinks as a block) will not have control of the shares.

In the second quarter ended in June, Mellanox had $72.8m in cash and another $29m in short term investments, which is obviously not enough for the company to make acquisitions and perhaps not enough to compete against QLogic in the InfiniBand ASIC space and now Intel, which has just acquired Fulcrum Microsystems, an Ethernet chip maker. As El Reg has previously reported, Mellanox has launched an ambitious networking ASIC called SwitchX that will be able to handle Ethernet, InfiniBand, and Fibre Channel traffic – and eventually, all at the same time and on the fly. This kind of technology takes money, and so will selling against Cisco and Intel.

It is hard to say what price the Mellanox shares will sell at and how much money it will raise, but at the Friday closing price of $35.16 per share, the full 3.45 million in shares would raise $121.3m. The bankers will get a chunk of that, and the share price will probably drift down because of the dilution, so call it $100m. This is not a lot of money in the modern IT racket, but it may be enough to help ramp up SwitchX and make a few small, tactical acquisitions.

At the market close on Monday, Mellanox had a market cap of $1.22bn, making it a bit too big for many companies to acquire but well within the appetites of Oracle, IBM, Hewlett-Packard, Dell, or Cisco should they decide they want a bigger stake in InfiniBand and Ethernet switching and host adapters.

Updated: Late Tuesday night, Mellanox priced the shares at $31.75 a pop, and said that works out to $95.25m in cash raised. The company expects to net about $90.5m. That additional 450,000 shares could fetch the company another $13.6m at the same price. ®

Using blade systems to cut costs and sharpen efficiencies

More from The Register

next story
Amazon sues former employee who took Google cloud job
Alleges breach of non-compete clause in contract
New research: Flash is DEAD. Yet resistance isn't futile - it's key
Electro-boffin may have SAVED the storage WORLD
THE GERMANS ARE CLOUDING: New AWS cloud region spotted
eu-central-1.amazonaws.com, aka, your new Amazon Frankfurt bitbarn
Aereo presses pause on 'tiny antenna' TV-streaming service
Vows to fight on after US Supreme Court ruling
IBM promises mainframes on tap as SoftLayer lands on London
Unbelievable... Chessington's nowhere near London
Dimension Data cloud goes TITSUP down under... after EMC storage fail
Replacement hardware needed as Australian cloud flops for 48-plus hours
WD adds Miracast support to feed-slinging tellybox gizmo
Small glitch: You still can't watch stuff from iTunes on it
IDC busts out new converged systems charts, crowns Oracle as Platform King
Nutanix/Simplivity not shown - but they're there. Oh yes
Cloudera, MapR, IBM, and Intel bet on Spark as the new heart of Hadoop
Screeching sound heard amid Spark stampede as Cloudera changes opinion on Hive
prev story

Whitepapers

How modern custom applications can spur business growth.
In this whitepaper learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
The Power of One eBook: Top reasons to choose HP BladeSystem
Only the Power of One delivers leading infrastructure convergence, availability and scalability with federation, and agility through data center automation.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximizing your infrastructure through virtualization
Virtualization continues to be one of the most effective ways to consolidate, reduce cost, and make data centers more efficient.
Build a Business Case: Developing Custom Apps
In this whitepaper learn how to maximize the value of custom applications by accelerating and simplifying their development.