This could also be titled where is Ethernet headed & how network companies, other than Intel & Broadcom, can survive & prosper.
Last month we saw two interesting announcements that may have foretold the future of Ethernet. The first was by Emulex, and it was that they were going to be acquiring Endace, a ethernet analytics technology company, and that it would close this acquisition in the first quarter of 2013. The second came on"Cramer's Mad Money" when Cramer said sell Mellanox, don't touch the stock. It has dropped from a high of $120 in September to $50 this week, a nearly 60% drop in three months.
In May of 2012 Emulex partnered up with my employer, Myricom, to license both our hardware and software technology for adding value to Ethernet. Two years ago Emulex acquired ServerEngines, a company that had commodity grade 10Gb Ethernet adapter silicon. So why did a leader in Fiber Channel storage networking buying a 10Gb Ethernet commodity silicon company, partner with a value added Ethernet company and announce an intent to acquire a third Ethernet analytics company? Simple Emulex understands that Fiber Channel has the same future that Token Ring, AppleTalk, and Myrinet have all shared, and that's Ethernet. Ethernet isn't the best architecture, but it is by far the most pervasive. The IEEE, the standards body behind Ethernet has remained active so the standards continue to evolve and keep pace with processor technology. If you recall from your days back in Computer Architecture, there are four performance curves: CPU, memory, disk & network. When we moved from Gigabit Ethernet to 10Gb Ethernet the network curve jumped in front of the disk curve. Now even disks spinning at 15K RPMs, can only provide data at about 1.2Gbps, and the newest FLASH drives are typically only 4X better, still well under 10Gbps. Furthermore 40Gb Ethernet is just around the corner for server to server communications. Add to that enhancements like: Data Center Bridging (DCB) which includes key concepts from Converged Enhanced Ethernet (CEE) and Data Center Ethernet (DCE), RDMA over Converged Ethernet (RoCE, pronounced Rocky), and the Common Communication Interface (CCI) and you'll see that Ethernet is continuing to expand to meet the demands of the bleeding edge. Companies like Emulex understand that the future of networking is Ethernet, and that profit will only come by adding value on top of this industry standard.
With only two companies selling Infiniband the future of this interconnect is in question. On August 20th Cramer's Mad Money was Obsessed with Mellanox at $113, it soon hit $120. At the time the implications of Intel's acquisition of QLogic's Infiniband assets weren't totally understood. Intel is a whale in the silicon market, and it can swish it's tail one way and buy Fulcrum (Etherenet switching silicon), then the other and buy up the second to last Infiniband provider. The question is will they continue to support both? Now four months later Cramer's calling Mellanox "the disaster du jour" as it struggles in the $50s. You can bet Cramer's recent remarks aren't going to help that stock move up anytime soon. Efforts like CCI, mentioned above, will remove most if not all of the technical advantages Infiniband might have, and this will force Mellanox into committing 100% to becoming an Ethernet technology provider. At that point on the server side they'll need to compete head to head with Emulex, and Qlogic who are both very well entrenched, and on the switch side with a host of deep pocketed competitors like Cisco, Brocade, Foundry, Force10, Extreme, etc… Competing on two fronts against well established companies as one orphans their primary technology differentiation is a challenge very few companies ever have to face, let alone survive.
So what does all this mean? If you are a networking company it's rather simple, embrace Ethernet, and find a way to add value on top of it or die. I'm sure other networking technologies will pop up in the future, like say quantum state photon based approaches, which will spawn new companies, and network products. Eventually though I'm sure we'll figure out how to map Ethernet into the quantum world…
Happy New Year.