One week after it closed its acquisition of the networking hardware company Mellanox Technologies, NVIDIA (NVDA -0.02%) announced today it planned to acquire the data center networking specialist Cumulus Networks.
Since Cumulus Networks proposes networking software-defined solutions that run on any compatible networking hardware such as... Mellanox's devices, the transaction will reinforce NVIDIA's data center portfolio. The company will be able to offer complete networking solutions -- chips, software, and hardware -- for enterprise and cloud data centers.
As a result, NVIDIA's data center business is poised to keep on growing. Over the last three years, it has been growing at an impressive 53% compound annual rate (CAGR) to reach $2.98 billion in fiscal 2020, which represented 27% of the company's total revenue.
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Building a network data center offering against strong competition
Management didn't disclose the terms of the transaction, but the size of the acquisition should remain modest relative to NVIDIA's scale since Cumulus Networks accumulated only $134 million of funding. As a comparison, the semiconductor giant's balance sheet showed $10.9 billion of cash, cash equivalents, and marketable securities, and $2.0 billion of debt at the end of last quarter.
In any case, NVIDIA will be competing in the crowded cloud networking data center market against the growing cloud-network specialist Arista Networks and the tech giant Cisco Systems, among others.
NVIDIA's significant footprint in data centers will provide cross-selling opportunities to scale Cumulus Networks' solutions, but it remains to be seen how the company's enhanced networking portfolio will perform against these strong and experienced competitors.
