Eyal Waldman: Unicorns, Palestinian parties & fast pipes

It is a beautiful clear day on the 102nd floor of One World Trade Centre in New York. Far below, the Hudson River dissects a blanket of skyscrapers, which in turn are punctuated by tiny criss-cross lanes of cars.

“In the future you will not have any traffic jams,” says Eyal Waldman, CEO of Mellanox, seated with his VP of marketing, Gilad Shainer, at large white table before the floor-to-ceiling panel glass windows. “Crime will go away, there won’t be any black markets. All this is enabled by the processing of data - and without large pipes [into the data centre] - you cannot do that.”

“We have the fastest pipes both for Infiniband and for Ethernet,” Waldman adds.

Waldman was born in Jerusalem, graduated from the Israel Institute of Technology outside Haifa and worked at Intel prior to founding Galileo Technology in 1994. In 1999 he left Galileo – which was sold to Marvell for $2.8 billion – and started Mellanox. This supplies end-to-end interconnect solutions and services for servers and storage. And fundamentally aims to speed up data process.

“What’s nice about this [data processing] is the early movers become the unicorns of the world,” says Waldman. “The unicorns are worth millions of dollars before making a lot of money. You look at Uber, you look at WhatsApp, you look at other companies that have raised money for tens of millions of dollars market cap, the reason they can do this is they can analyse more data, and they do it in real-time.”

Over the last 16 years the company has rolled out increasingly fast Infiniband and Ethernet solutions. This culminated in last week’s announcements about a new network adapter and switch, which aim to deliver the fastest possible Ethernet, at 100 Gigabit per second.

“People recognise Mellanox with Infiniband but we’re taking more and more market share on the Ethernet side as well,” explains Shainer.

It may be hard to get instantly excited about the sort of behind-the-scenes connectivity that Mellanox offers. But it is pretty fundamental to most aspects of work, leisure and business and this appears to be playing out in the financial markets with Mellanox shares gaining 17.98% in the last 200 days. And Octa Finance reporting this week that analysts at Piper Jaffray upped its target price to $60.

Yet share price aside – the real spike incidentally occurred in 2012, due to pent up demand and built up inventory, according to Waldman – three things tend to get written about Mellanox. Firstly, whether or not it will sell. Secondly, how it compares to its competitors. And thirdly, that it is Israeli. We decided to look at each point in turn.

Will Mellanox sell?

Despite constant rumours to the contrary Waldman has been consistently categorical that he does not want to sell. In 2012 he told the Jewish Chronicle: “I don’t want to criticise anybody. I understand why people sell their businesses. You set up a startup and you work very hard for seven or eight years and then somebody comes along with a very good offer, and you think: ‘Why not?’ It’s great for the individuals involved but it doesn’t do very much for the Israeli economy.”

While last week he explicitly told Bloomberg TV reports: “We’re a generation ahead of Intel, Broadcom and other competitors we have. We can grow faster as an independent company.”

Mellanox vs. its competitors?

Mellanox has been predominantly known as an Infiniband company. Yet the recent releases specifically placed Mellanox in the sphere of Ethernet. And it firmly pitches its offering against its main competitor Broadcom. 

“If you look on performance, on power consumption, capability to support those growing infrastructures, there is nothing that matches,” explains Shainer.

“Infiniband [is used] where it is performance critical or performance important [or] sensitive. And we see Ethernet in other places,” clarifies Waldman.

Mellanox prides itself on delivering the fastest offering. It already provides 100 Gigabit Infiniband and had a 2016/2017 launch target for double the speed. Waldman foresees these will “continue to grow”.

“There is no limit - we can go wider and faster.” The company already has “visibility” on a 200 Gigabit switch for Ethernet, he adds, and anticipates incremental speed increases released every two or three years.

In the Infiniband arena Mellanox’s main competitor is Intel. This May, Stephen Simpson wrote an in-depth piece in Seeking Alpha about the challenges Mellanox faces with Intel’s new total-package, Omni Scale Fabric. As he puts it “I'm highly sceptical that this is any sort of death-blow to Mellanox.”

In fact, one of the points the company likes to stress is that, unlike Intel, it does not want to lock companies in. They can pick and choose solutions from a variety of vendors and it is actively promoting Open Ethernet.

An Israeli company in Palestine?

Mellanox began working in Palestine around five years ago and has been increasing its employees since then. Aside from a cost effective way to find labour, Waldman explained to Bloomberg in March: “We need to find a way to make peace between both peoples. If you get the people closer, it will be easier to make peace.”

“It is working well,” he tells us. “We’re going to increase our workforce in Ramallah and we may be the first company putting an office in Rawabi” the first Palestinian planned city.

“They went for a weekend together [in Bethlehem recently],” he adds. “They had a party - I don’t think too many companies in Ramallah are doing those events.”

The authors of the Bloomberg piece suggested: “The jobs can also elicit feelings of resentment from Palestinians who know they’re being paid dramatically less than peers in Israel and other countries.”

However, Waldman is keen to refute this. “I don’t think that is the case,” he says “we adjust our compensation to local territory. You don’t pay someone in China the same salary as you pay someone in the US. I think they’re very well compensated compared to their peers.”

“We compensate in a very fair way around the world,” he adds. “There is no preference to location.”

Anything else to add?

Over the last 16 years data and the data centre have reached new levels of importance in society. These power everything we do and have fuelled the transformation to our new online lives. Companies like Mellanox quietly sit in the background and help make it all happen.

So, how does Waldman feel about the time period? “It went too slow,” he says. “I always think we do things slower than we should”.

And if there is one thing Mellanox wants to be identified with it is high speed. 


Related reading:

Some context on the recent Mellanox announcements: What does faster Ethernet mean?





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