Mellanox to Acquire California's Kotura for $82 Million

The Israeli network-technology company says the proposed acquisition will help it meet the growing demand for next-generation high-speed network products.

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Mellanox Technologies, whose products are used by computer networks for data transfer and storage, will acquire the California-based company Kotura for $82 million as part of its effort to transition to the next generation of high-speed networks.

Mellanox, an Israeli company, said Kotura's expertise in silicon photonics will enable its interconnect products – like adapters, switches, software and silicon – to reach a bandwidth of 100 gigabits per second and more at greater distance and lower cost. The company has over 120 granted or pending patents in CMOS (or complementary metal-oxide semiconductors, pronounced SEA-moss) photonics and packaging design, Mellanox said in announcing the deal Wednesday.

Mellanox said it plans to turn Kotura's Monterey Park, California, offices into its first research and development center in the United States and will retain the company’s existing product lines to ensure continuity for customers and partners

"We believe … that owning and controlling the technology will allow us to develop the best, most reliable solution for our customers," said Mellanox CEO Eyal Waldman in a statement. "We expect that the proposed acquisition of Kotura's technology and the additional development team will better position us to produce 100Gb/s and faster interconnect solutions with higher-density optical connectivity at a lower cost."

Shares of Mellanox closed up 6.2% in Tel Aviv Stock Exchange trading at NIS 201.50. The stock tumbled at the end of April, even though it exceeded analyst's consensus estimates for first-quarter earnings, after two investment houses downgraded the stock. Even after Thursday's rally, Mellanox shares remain down 15.8% on the TASE.

The acquisition, which Mellanox will pay for entirely in cash, is expected to be completed in the second half of the year. Mellanox said it expects the transaction to add to its 2014 non-GAAP earnings by one to three cents per share.

Kotura's silicon photonics technology will enable Mellanox data center customers to meet the growing demand for high-performance, Web 2.0, cloud, data center, database, financial services and storage applications, the company said.

The proposed acquisition is subject to customary closing conditions, including the receipt of applicable regulatory approvals and the approval of closely held Kotura’s shareholders. The boards of both companies have already approved the deal, Mellanox said.

The Mellanox team.Credit: Ofer Vaknin