Why does Mellanox have four potential suitors?

It looks like Microsoft is looking to give itself the gift of networking in the form of an acquisition — Mellanox. But it may have to get in line.

An Israeli financial publication called TheMarker reports that Microsoft not only has an interest in acquiring the network chip maker, but it also has reportedly engaged Goldman Sachs to handle negotiations. The rumors first popped up before Christmas, and understandably there has been little activity since.

But Microsoft may not be the only vendor looking to grab Mellanox. Data Centre Dynamics in the U.K. reported last month that three other firms — Xilinx, Intel, and Broadcom — could also be interested in acquiring the company. As far back as October, CNBC was reporting that Mellanox was looking for a buyer.

One thing’s for certain, when a company has that many suitors, it gets bought. The last time I saw this much activity around a firm it was cloud provider SoftLayer, which IBM eventually bought and made a central component of its cloud strategy.

Those three non-Microsoft companies would make more sense, as Mellanox is a hardware firm, but there is a good reason for Microsoft to want Mellanox, as well. It’s a major customer of Mellanox, whose claim to fame is extremely high speed and bandwidth connections between server hosts.

What is Mellanox and what does it do?

Mellanox is based in Israel and was founded in 1999 by former Intel and Galileo Technology executives. It was one of the successful companies at bringing the InfiniBand fabric to market. Its equipment is used in half of the top 500 most powerful supercomputers.

Mellanox was first to market with 100 Gb/sec InfiniBand and Ethernet connections, and more recently the company introduced 200 Gb/sec InfiniBand switches and server adapters that should be coming to market soon.

And that’s what Microsoft wants for the Azure network, since it buys so much of it already. I can’t imagine they would buy such a popular product and promptly yank it from the market — that has never been Microsoft’s style. But if it gives them a leg up on Amazon and other cloud providers, then it would be worth it to write a big check.

Whoever acquires Mellanox will have to jump through some hoops because international acquisitions are never easy, and given the geopolitics, might be even worse in this case. A protracted merger would not be good for either party or its customers. For now, there has been no further word — so we’ll wait and see.