Mellanox Capitalizes on 25G Transition
Mellanox Technologies Ltd. (Nasdaq: MLNX) turned in its fifth consecutive quarter in which it increased revenue, and during the company's call with analysts, CEO Eyal Waldman explained how new products are likely to help the company extend that run for the next quarter or two.
Those products include Spectrum Ethernet switches, designed to take advantage of the transition to speeds of 25G and faster. Waldman said Mellanox is in more than ten trials with customers representing hyperscale data center, private cloud, public cloud, storage and other applications. Trial partners are roughly split between those trying out 25G switches and 100G switches; some are testing a mix.
In network interface cards (NIC), he said the company still dominates in the 40G market, but the transition to faster speeds is in progress, with some customers migrating from 10G to 25G, and others moving from 40G to 50G. He said Mellanox owned 100% of the 25G market in Q1, and probably will have about that in Q2 once all the market data is collected. "So we'll have a lead of at least two quarters," he said, adding that he has yet to hear of any competitors in production.
The company continues to excel with InfiniBand, which is typically used in high-performance computing applications, including supercomputing. Waldman said that most of the fastest supercomputers in the world rely on Mellanox product, including the one that is currently the fastest in the world (the Sunway TaihuLight).
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Waldman said Intel Corp. (Nasdaq: INTC) has dropped the pricing on its competing Omnipath products to gain market share. "Good enough is good enough for some customers," he noted, allowing that with the aggressive pricing, Intel might get to 10% market share, but he was confident Intel won't become a significant competitor. Asked about Mellanox's response to the threat, Waldman said the company will not cut its margins (now 70%) on its InfiniBand portfolio.
Earlier this quarter, Mellanox announced an interconnect product line, ConnectX-5, that can offload some compute functions from the processors in the systems being connected. Waldman said that he expects revenue from that to grow to be significant. (See Mellanox Accelerates Ethernet/Infiniband Adapter.)
One of the first fruits of the acquisition of EZChip is a series of programmable processors, which Waldman said would initially find use in storage applications and controllers, and will later be used as smart NIC. After that Mellanox expects the products to be adopted in data communications platforms (where they would compete with Intel). (See Mellanox Eases Into Network Processor Market.)
Mellanox reported Q2 revenue of $214.8 million, up 9.1% from the $196.8 million in sales from the preceding first quarter. That helped the company swing from a Q1 loss of $7.2 million to a profit of $4.7 million in the quarter just closed.
— Brian Santo, Senior Editor, Components, T&M, Light Reading