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Mellanox (MLNX) Drives on Growing Clientele, Collaborations

Zacks Equity Research
Updated
BancorpSouth (BXS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Mellanox Technologies Inc. MLNX is riding high on expanding customer base and portfolio strength driven by strategic partnerships.

To date in 2017, the company’s products have been selected by cloud computing and semiconductor bigwigs like Hewlett Packard Enterprise HPE, Alibaba Group BABA and Advanced Micro Devices Inc AMD.

Moreover, collaborations with the likes of VMware and HPE has significantly expanded Mellanox’s product portfolio.

Interconnect Solutions Gain Rapid Adoption

Market research firm IDC forecasts that by 2025, the global datasphere will grow to 163 zettabytes (that is a trillion gigabytes), which is ten times the 16.1 zettabytes (ZB) of data generated in 2016. This exponential growth bodes well for Mellanox’s interconnect solutions owing to growing demand for higher network speeds for fast processing of data.

InfiniBand is highly scalable and its off-loading capabilities that reduce load on CPUs are attracting artificial intelligence (AI), machine learning and deep learning providers. Moreover, increasing adoption of cloud computing is driving demand for Ethernet, which is considered better than Fibre Channel, primarily due to its high speed (100 G versus 16/32 G) and low cost.

Recently, Mellanox’s Spectrum Ethernet Switch was selected by Hewlett Packard to power its StoreFabric M-series storage networking switches. Spectrum is the part of Ethernet Storage Fabric (ESF) solution, which per Mellanox, is the fastest and most efficient Ethernet storage network available for the enterprise and cloud.

Mellanox’s products are gaining rapid adoption, which is evident from Alibaba’s deployment of 25GbE and 100GbE ConnectX-4 EN family of Ethernet adapters in its data centers.

Moreover, Mellanox’s Ethernet and InfiniBand interconnect solutions are powering AMD’s EPYC processors, which were launched in June, this year. Intel’s Xeon Scalable processor-based compute and storage platforms are also using the company’s InfiniBand solution.

Collaborations Drive Customer Base

Apart from strong demand for Mellanox’s interconnect solutions, collaborations with the likes of VMware and Hewlett Packard have helped the company gain strong footprint in the cloud and data-center market.

Mellanox has partnered with VMware to combine iSER (iSCSI Extensions for Remote Direct Memory Access) networking solutions with vSphere. The company’s iSER uses an Ethernet Storage Fabric as a unified connectivity solution for compute and storage. This provides improved performance at lower costs.

Mellanox has also partnered with Hewlett Packard, under which the former’s ConnectX-5 InfiniBand adapters and Switch-IB2 InfiniBand switches were used in latter’s HPE SGI 8600 and HPE Apollo 6000 Gen10 systems.

We note that NASA Ames Research Center has selected Mellanox’s EDR InfiniBand solutions along with HPE SGI 8600 liquid cooled platform to expand its “Electra” supercomputing cluster.

Mellanox’s collaboration with Microsemi Corporation is also expected to solidify the company’s footprint in the high performance computing market going forward.

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