Mellanox Technologies to acquire EZchip for $811M
Eyal Waldman
Mellanox makes InfiniBand and Ethernet interconnection platforms and products for the data centre while EZchip sells network and multi-core processors that are used in carrier edge routers and enterprise platforms.
EZchip’s customers include Huawei, ZTE, Ericsson, Oracle, Avaya and Cisco Systems.
“Mellanox needs to diversify its business; it is still heavily dependent on the high-performance computing market and InfiniBand,” says Bob Wheeler, principal analyst, networking at market research firm The Linley Group. “EZchip helps move Mellanox into markets and customers that it would not have access to with its existing products.”
CEO Eyal Waldman says Mellanox will continue to focus on the data centre and not the WAN, and that it plans to use EZchip’s products to add intelligence to its designs. Mellanox's Ethernet expertise may also find its way into EZchip’s ICs.
But analysts do expect Mellanox to benefit from telecom. “The big change has to do with Network Function Virtualisation (NFV) and the fact that service provider’s data centres are starting to look more and more like cloud data centres,” says Wheeler. “There is an opportunity for Mellanox to start selling to the large carriers and that is a whole new market for the company.”
Acquiring EZchip
Both companies will ensure continuity and use the same product lines to grow into each other’s markets, said Waldman on a conference call to announce the deal: “Later on will come more combined solutions and products.” First product collaborations are expected in 2016 with more integrated products appearing from 2017.
“Mellanox sees a need to add intelligence to its core products and it does not really have the expertise or the intellectual property,” says Wheeler. One future product of interest is the smart or intelligence network interface controller (NIC). “By working together they could product quite a compelling product,” says Wheeler.
In 2014 EZchip acquired Tilera for $50 million. The value of the deal could have risen to $130 million but was dependent on targets that Tilera did not meet, says Wheeler. Tilera's products include multi-core processors, NICs and white box security appliances. EZchip has also announced the Tile-Mx product family using Tilera’s technology, the most powerful family device will feature 100, 64-bit ARM cores.
The primary application of Tilera’s products is security applications: deep-packet inspection and layer 7 processing. Instead of replacing the general-purpose processor in a security appliance, an alternative approach is to use an intelligent NIC card with a Tilera processor connected via the PCI Express bus to an Intel Xeon-based server. “The card can do a lot of the packet processing offloaded from the Xeon,” says Wheeler.
Another area where EZchip’s NPS processor can be used is in more dedicated appliances or in an intelligent top-of-rack switch. The NPS would perform security as well as terminating overlay protocols used for network virtualisation in the data centre. “You can terminate all those [overlay] protocols in a top-of-rack switch and offload that processing from the server,” says Wheeler.
The key benefit of InfiniBand is its very low latency but the flip side is that the protocol is limited with regard routing to larger fabrics. Adding intelligence could benefit Mellanox’s core Infiniband fabric products, notes Wheeler.
EZchip’s founder and CEO Eli Fruchter said he expects the merger to open doors for EZchip among more hyper-scale data centre players: “With the merger we believe we can be a lot more successful in data centres than by continuing by ourselves.”
Mellanox has made several acquisitions in recent years. It acquired data centre switch fabric player Voltaire in 2011, and in 2013 it added silicon photonics start-up Kotura and chip company IPTronics in quick succession. Now with EZchip's acquisition it will add packet processing and multi-core processor IP to its in-house technology portfolio.
The EZchip acquisition is expected to close in the first quarter of 2016.
Further information:
Mellanox’s Waldman: We've discussed merging for years, click here
EZchip targets multi-core processing with Tilera purchase
Network processor specialist, EZchip Semiconductor, is to acquire Tilera. The deal is valued at $130 million in cash: $50 million when the deal closes, and up to $80 million more depending on performance targets being met.
Bob Wheeler, The Linley Group
Tilera's products include multi-core processors, intelligent network interface cards (NICs) and one rack-unit (1RU) network - 'whitebox' - appliances used for security applications.
Acquiring Tilera will broaden EZchip's market. Tilera's devices are used for network appliances, enterprise routers, cloud computing, video and voice encoders, security, deep-packet inspection, load-balancing, and emerging applications such as software-defined networking (SDN) and network functions virtualisation (NFV).
EZchip's first acquisition will also broaden the company's US presence and customers: Tilera has 100 customers including Brocade, Check Point Software Technologies, Cisco, Fujitsu, Harmonic, MikroTik and ZTE.
EZchip estimates that with the acquisition, its total addressable market will double to $2 billion by 2016.
EZchip's flagship NPS is a high-end network processor family while Tilera's multi-core general processors include the Tile-GX family with 9, 16, 36 and 72, 64-bit cores, programmed using the C-language and which supports the Linux operating system.
"The two companies are highly complementary," says Bob Wheeler, principal analyst for networking at the Linley Group. "Beyond the obvious addition of products, markets, and customers, I see Tilera’s software and systems expertise as important to the success of EZchip’s existing NPS programme."
Eli Fruchter, CEO of EZchip, says that the two companies have been discussing co-development of a next-generation multi-core family that will add specialist networking accelerator hardware from EZchip. The resulting family will have the highest core count at the lowest power, while achieving leading networking and packet-processing performance, says the CEO.
Tilera's designs are noted for their processing performance per watt. Wheeler also highlights the company's iMesh tiled architecture which enables efficient scaling as cores are added to a chip. "Tilera’s proprietary 64-bit VLIW [very long instruction word] CPU design is also important in delivering leading power efficiency," he says.
The next-generation device family will use a standard processing core and move away from Tilera's proprietary technology. EZchip's NPS uses the 32-bit ARC core which EZchip has redesigned. "Network security and monitoring are the primary targets [for the next-gen devices]," says Wheeler. "Tilera currently serves other applications, including videoconferencing, but these won’t benefit from EZchip’s accelerators."
Tilera's revenues were $35 million in 2013, suggesting single-digit percent market share using EZchip's $1 billion TAM estimate. It thus has some way to go to compete with Broadcom and Cavium. Near term, customers may be more willing to work with a profitable public company, notes Wheeler, but for EZchip to achieve major share gains will depend on delivering next-generation processors.
Tilera's revenues declined in the first half of 2014. EZchip would not detail why, except to suggest that the decline in orders is temporary and that growth will return in the second half of 2014. EZchip is confident Tilera's revenues will exceed $35 million in 2015.
EZchip will pay Tilera's shareholders up to $80 million if revenue targets are met: $50 million in cash if revenues reach $45 million between when the deal closes in Q3 2014 and June 2015, and a further $30 million if revenues of $31 million are achieved in the second half of 2015.