Please ensure Javascript is enabled for purposes of website accessibility

NVIDIA Plans to Acquire the Data Center Networking Specialist Cumulus Networks

By Herve Blandin – May 4, 2020 at 4:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The acquisition will reinforce the semiconductor specialist's data centers business.

One week after closing its acquisition of networking hardware company Mellanox TechnologiesNVIDIA (NVDA -0.66%) announced today that it plans to acquire data center networking specialist Cumulus Networks.

Cumulus Networks proposes networking software-defined solutions that run on any compatible networking hardware, such as Mellanox's devices. As a result, this acquisition will reinforce NVIDIA's data center portfolio, allowing the company to offer complete networking solutions -- chips, software, and hardware -- for enterprise and cloud data centers. 

NVIDIA's data center business is poised to maintain its impressive growth. Over the last three years, it has been growing data center revenue at a 53% compound annual rate (CAGR) to reach $2.98 billion in fiscal 2020, which represented 27% of the company's total revenue. 

Cloud on blur computer data center background.

Image source: Getty Images.

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. For context, Cumulus Networks accumulated only $134 million of funding prior to the deal announced today. As a comparison, NVIDIA'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.

Herve Blandin owns shares of Cisco Systems. The Motley Fool owns shares of and recommends Arista Networks and NVIDIA. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$121.39 (-0.66%) $0.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.