[godelmachine]

I had great respect for Mellanox when I came to know that they invented InfiniBand.

Again, I am suprisied it’s valued at only $6.9Bn.

Pardon my ignorance, but how come mobile apps and websites get valued for 10+ or 20+ Bn dollars , while someone who creates real technology is valued at only $6.9Bn

[matude]

> Pardon my ignorance, but how come mobile apps and websites get valued for 10+ or 20+ Bn dollars , while someone who creates real technology is valued at only $6.9Bn

Imagine a building, say a shopping center, airport, or a city main square, that gets the same amount of visitors per day as some of those apps, and it might start to make more sense. Take Clash of Clans for example, valued at $10 billion. It has around 100 million daily active players. One of the busiest airports, the Hartsfield-Jackson Atlanta International Airport, has 104 million passengers annually. NY Times square receives about fifty million visitors per year.

If something, anything, gets 100 million visitors PER DAY, the value of such a real estate, even if digital, is immense.

[Gpetrium]

It is worth adding that the margin out of an app tends to be A LOT higher than shopping centers, airport, etc while the initial capital tends to be a fraction of it.

There are also different ways in which you can use the data to help you create another app with high daily active players. An app can have the whole world as their oyster, unlike shopping centers, etc.

[throwaway5752]

It's worth adding, too, that the airport and building take much larger capital expenditures to build and are far less reproducible as a result... and will probably have decades or centuries of future revenue. For a given game, that's probably a few years of peak popularity and comparatively easy to replicate by competitors.

To the point of this article, it's kind of surprising to me at least that licensing companies like ARM and Qualcomm have been so much more successful than Mellanox.

[angry_octet]

A facility like an airport has a monopoly position, geographically and due to regulation, and the capital cost of competition, and as you say will likely be earning for many decades. ARM also has a long term monopoly, think of the sheer weight of code for ARM devices. It takes huge capital to produce a new from scratch CPU arch, esp due to patent problems (which makes RISC V all the more amazing), and deep pockets to start producing chips at scale, build a developer ecosystem etc. Games titles can produce a lot of cash for low CAPEX, but I don't think we'll be hearing about Fortnite in 5 years, let alone 50.

In contrast, Mellanox produces a niche product. It is critical to HPC and some deep pocketed finance people, but it is never going to be at the volume of e.g. ethernet.

The long term aspect is that, as Moore's law scaling becomes harder and harder, distributed computation becomes more essential. Right now we are in a dip in peak compute rate requirements, because we have invented battery powered computers and 4G, and hence cloud. But the work done in the cloud isn't very taxing, mainly single threaded. But I'm confident we'll soon be seeing a lot heavier parallel computation in the cloud soon, and stuff that won't fit into one or four GPUs. The tradeoffs between PCIe and IB after 4*16x start to favour IB, especially if the IB silicon is on the NVLink switch complex. So from the perspective of integration bringing much greater IB volume, the acquisition multiples the worth of MLNX by an order of magnitude -- if nVidia can execute.

[kevinlou]

The digital airport comparison is such a great way of wrapping my mind around the concept of high valuations for digital commerce - it's business without the usual B&M overhead.

[drewg123]

A lot of IB technology is based on precursors like Myrinet, Quadrics, etc. Those companies were driven from the HPC market and the top500 by Mellanox in the last 15 years. It is arguable that IB won simply because it had better marketing, and a lot more venture capitol behind it.

At one point, 6 of the top 10 supercomputers in the top 500 were interconnected with Quadrics, and over 1/3 with Myrinet. However, both Quadrics and Myricom are both long gone. And neither of them sold for anything close to $6.9B

[nerpderp82]

IB has been doubling in bandwidth with every release, 10,20,50,100 and now 200G. Those other interconnect technologies did not do that.

[drewg123]

Honestly, they competed on price & marketing at first. The handwriting was already on the wall for these companies long before IB had any real advantage on speed. We were all limited by PCIe bandwidth, after all. So no matter what the link speed is, you're not going to get more bandwidth than what PCIe can provide.

I worked for Myricom when Mellanox was starting out with IB. I recall stories from that time of customers that would try IB for something like 1/2 to 1/3 of what we charged. But they could never get it to work, and ripped it out and installed Myrinet. Sadly, this made our management smug. Mellanox eventually ate their lunch because we never responded to their marketing and pricing war.

[angry_octet]

At one point it seems Myrinet was as dominant as Mellanox is now. It was very exciting at the time to get something better than ethernet, and way cheaper than SGI. Huge resistance from the developers who were used to ethernet, which still hasn't gone away.

I don't think it was just the price or marketing (although Mellanox at least had sales people -- never heard from anyone at Myricom even after buying $$ of gear). Mellanox always seemed to be pushing the envelope, which might have been more R&D dollars. Never had problems with IB not working (CX-4 and up) but I guess the gremlins depend on scale.

[bigtones]

Because the total addressable market for consumer mobile apps, and therefore potential dollars of revenue is much higher than for Mellanox with Infiniband - which by contrast is only the HPC market at this point.

[praneshp]

> how come mobile apps and websites get valued

Can you name many apps and websites that closed (aka IPO or sold, not funding round) at 10+/20+ billion? Unless you're going to go for the stupid "uber is an android app my kid could could make for their senior project" shtick, I think most 10b+ apps are backed by _real_ technology

[tntn]

Snapchat? (IPO valuation of 33 B)

(Not interested in playing the no true technology game, just pointing out that snapchat is the highly valued mobile app that comes to my mind)

[praneshp]

sorry, I should have moved the end of my comment ("are backed by _real_ technology") to the end of my first statement.

[finkin1]

WhatsApp ~$22B acquisition by Facebook. LinkedIn ~$26B acquisition by Microsoft. Those are two that I can think of from memory.

[praneshp]

Ah, I see. Not only do you have to have made solid technology, it should not be delivered through an app or website. I didn't realize those were the goalposts.

(https://engineering.linkedin.com/open-source as as starting point)

[finkin1]

I'm not agreeing with OP's assumption that there isn't any tech in apps or websites. I'm just giving you examples so that you can stop wasting your time with the least charitable interpretation of OP's point and actually respond to what he might have meant.

[godelmachine]

LinkedIn - $23Bn.

[rayiner]

What's always blown my mind is Apple's acquisition of PA-Semi for less than $300 million. Apple is so far ahead of other phone makers in CPU performance that I would struggle to name another instance where there was such a big performance gap between competitors in the same market. I'm sure that Apple invested a lot in its chip design team since then, but the initial acquisition cost was tiny compared to the result.

[wtallis]

Their acquisition of Intrinsity (designers of the Apple A4 SoC) may have been even more of a steal, with estimates placing the price somewhere in the $50-150M range.

[bredren]

"real technology" is not an objective measurement of societal value.

[jblow]

Except yes it is, because all these software apps are built on prior “real technology” and would be impossible without it. The flow of capital just doesn’t reflect that (and it’s not clear it should).

[wnissen]

But Mellanox is making niche equipment. You don't need an Infiniband interconnect if 10-Gig Ethernet will do the job. Only densely "coupled" problems, where the answer calculated on one core affects the answer calculated everywhere, need that kind of ultra-high-end interconnect. Your typical app scales very nicely across a bunch of servers connected with commodity networking.

This is more like a race car company not being as valuable as Toyota. Yes, the technology of the race car is unbelievable, but there are only a few thousand race cars in the whole world and there's a Toyota in every household.

[linksnapzz]

Wait another thousand years, and tell us that again.

[raphaelj]

Market values profit, not produced value (i.e. revenue).

[bigtones]

That's not true - see Amazon. Public markets value and price future potential profit.

[valuearb]

Essentially it's true, the market values each companies stream of future earnings out to infinity, discounted back for time to present day value.

The market just has a big dissonance in how it estimates and discounts those future earnings. Amazon is seen as a future huge profit maker, while Apple is viewed as perpetually at risk of a large scale decline in it's recent profitability.

[ghaff]

There were a lot of companies involved in Infiniband early on, not least of them Intel.

[shawnz]

Where's the room for growth in Infiniband? Why wouldn't you just use Ethernet in future projects?