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July 6, 2017
Israel's Mellanox is taking a swing at dominant rival Broadcom with the launch of a new Ethernet switch chip that will offer customers scalable bandwidth capabilities in the data center ranging from 10 Gbit/s to as much as 400 Gbit/s.
A successor to the vendor's Spectrum product, which promises speeds of up to 100 Gbit/s, the forthcoming Spectrum 2 device was developed in response to growing customer demand for 200Gbit/s and even 400Gbit/s Ethernet connectivity, said Eyal Waldman, Mellanox's CEO, during a press conference in London earlier today.
Waldman is making some bold claims about the new product in comparison with offerings from rivals such as Broadcom Corp. (Nasdaq: BRCM), the dominant market player, and he evidently has high hopes for the technology.
Spectrum 2 is ten times more "scalable" than anything in the market today, he says, and is 1.5 times more power efficient than existing technologies.
"We have Spectrum today which is a very advanced switch, and we are selling thousands each quarter and seeing more traction, but Spectrum 2 is the next generation device," Waldman told analysts and reporters. "This is the first time people will have 200 Gbit/s and 400 Gbit/s Ethernet and we have people asking for that."
Figure 1: Unveiling Spectrum 2 Seated from left to right: Yossi Avni, vice president of sales for EMEA; Eyal Waldman, CEO; and Colin Bridger, senior director for Northern Europe.
Demand appears to be coming from customers across a variety of sectors, including the hyperscale web companies, financial services companies and even carmakers eyeing the deployment of more advanced connected-car services, including autonomous driving features.
In fact, Waldman even claims that some of the vendors against which Mellanox Technologies Ltd. (Nasdaq: MLNX) competes in other market segments have been turning to the Spectrum technology. "People that see us as competitors are now putting in Spectrum appliances because of low latency demands," he says.
Besides its Ethernet switch devices, Mellanox also develops technologies in the markets for multi-core CPUs (central processing units), Ethernet adapters, cables and transceivers and network processors.
The company's "end-to-end" capability promises customers better performance than if they are mixing products from different vendors and gives Mellanox a big advantage over rivals addressing specific bits of the market, say executives.
Of course, that does not mean customers are prevented from using some of Mellanox's products alongside rival offerings, says Waldman. He insists that Mellanox is fully committed to "open" platforms and that its technologies can be used with multiple operating systems, including Cumulus Linux, OpenSwitch, SnapRoute and Microsoft's SONiC.
Asked what really distinguishes Mellanox from Cisco Systems Inc. (Nasdaq: CSCO), which has also been making noises about the scalability of its switching technologies, Waldman is scathing about his rival's "closed" approach.
"The difference between Cisco and us is that they sell you a black box and you can't make changes, while we come with an open platform and enable ecosystems around us to develop," he says. "The hyperscale guys want control -- they don’t want us to give them a black box."
The black box term usually refers to a technology in which the hardware and software is tightly integrated and delivered by a single vendor. Its opposite is the white box -- a common, off-the-shelf device that in principle can run software programs from a multitude of different players.
Although Mellanox claims to have moved in this direction, it would obviously prefer customers to make use of its own MLNX-OS operating system, executives admit.
Lack of execution
With the Spectrum 2 product, the main ambition is to grab market share from market leader Broadcom, which currently controls more than 90% of the market for Ethernet switches, according to Waldman.
Mellanox is a relative minnow, with less than 5% of that market, but it claims to have grown at Broadcom's expense since entering the game just three years ago with the Spectrum product.
"Spectrum came only three years ago and so we are quite new to this game but we are taking market share," he says. "We find ourselves in a good position. People like Broadcom less because of their dominant market position."
While other players also claim to be developing Ethernet switch technologies, Waldman says he has not seen much activity from the likes of Cavium Inc. (Nasdaq: CAVM), Marvell Technology Group Ltd. (Nasdaq: MRVL), Barefoot Networks and Innovium.
He attributes Broadcom's success to the length of time it has been active in the market and a "lack of execution by other people."
Mellanox has seen its revenues increase at an impressive compound annual growth rate of 30% over the last three years, generating sales of $857.5 million in 2016, and a margin for earnings (before interest and tax) of 21%.
After reporting disappointing results for the first three months of the year, when revenues fell by 4% on a year-on-year basis, it is anticipating a slowdown this year but is optimistic about the outlook for 2018.
The company's strength lies in the nascent market for network interface cards supporting connectivity of 25 Gbit/s and more.
"We are well positioned to benefit from the market transition," says Waldman. "We have 77% of the market for 25 Gbit/s and above -- when more take that we will be the ones taking the market."
Mellanox executives say that customers in China and the US are already beefing up their infrastructure capabilities and deploying 25Gbit/s technologies but have been disappointed by the weak demand for these products in Europe.
The company says a software development kit for Spectrum 2 is already available and that the integrated circuit will go on sale later this year.
— Iain Morris, , News Editor, Light Reading
International Editor, Light Reading
Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).
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