San Jose, California-based Xilinx has hired Barclays to advise it on the purchase of Sunnyvale, California and Israel-based Mellanox, reports CNBC, citing unnamed sources. Xilinx is mulling a Mellanox bid of more than $100 per share, valuing the company at around $5.5 billion, according to those sources. Investors currently value Mellanox at around $5 billion. Xilinx is valued at about $22 billion.
Xilinx is known for its programmable silicon, and in particular it’s renown as the inventor of the field programmable gate array (FPGA).
Mellanox leads the high-performance Ethernet NIC market. Earlier this year Mellanox VP of Marketing Kevin Deierling told SDxCentral that the company has about 70 percent market share in 25G, 50G, and above NICS. Mellanox competes against vendors including HP, Intel, and Marvell in that market. It also competes against Cisco in Ethernet switches.
“Xilinx has always been an FPGA company,” said Linley Gwennap, principal analyst with the Linley Group. “Under new CEO Victor Peng, however, the company is targeting new markets, such as data center and automotive. Its forthcoming Versal products combine FPGA and processor technologies. Acquiring Mellanox would give Xilinx additional products to sell into the data center while completing its transformation into a processor company.”
Peng was named Xilinx president and chief executive officer in January. He has been with the company since 2008. Xilinx reported record revenues of $746 million for its most recent earnings, the second quarter of fiscal year 2019, up 19 percent year over year.
Linley added, “I don’t know that this deal would have much effect on the semiconductor industry as a whole, but it would strengthen the Mellanox products and give Xilinx a better growth strategy.”
Investors for both companies seem to like the prospect of a merger. Mellanox shares rose from about $89 on Wednesday to about $92.70 today, compared to the low $70s that they were trading in October. Xilinx shares are trading at $86.6 compared to the mid- to upper-$70s they were trading in October.
If a deal does happen, Xilinx could make an offer by December, according to CNBC’s sources.