Solarflare Communications and Level 5 Networks — two privately-held Ethernet component startups — announced a merger this week which sets the stage for lower-cost 10G Ethernet server adapters based on common network cabling.

Solarflare, which makes chips for 10G Ethernet switches and network interface cards based on unshielded twisted pair (UTP) wiring, is merging with Level 5, which makes copper/fiber Gigabit and fiber-only 10G Ethernet server NICs with protocol offloading and acceleration features.

The combined company, worth more than $50 million in cash, is keeping the Solarflare name. Prior to the merger, Solarflare and Level 5 had raised $78 million and $39 million in venture capital, respectively. Solarflare investors include Intel and Oak Investment Partners, which is also an investor in Level 5, as is IDG Ventures. (IDG is the parent company of Ventures and Network World.)

The new Solarflare will continue selling network silicon to switch and NIC vendors, as well as Level 5-based NICs to enterprises and channel partners. The company also plans to combine its technologies in developing a 10G Ethernet copper server NIC with advanced protocol and memory handling features. The combined entity will be headed by Solarflare CEO Russel Stern, and headquartered in Solarflare's Sunnyvale, Calif., location. Level 5's Cambridge, U.K. office will become a development center.

With the IEEE's 10GBase-T standard expected to be ratified in June, uses can expect to see 10GBase-T products later this year.

"Today, we're not talking about product announcements," says Stern. "But we would like to be one of the first, if not the first company out there with a high-performance 10Gbase-T NIC." When 10GBase-T products come to market, users could expect per-port pricing as much as eight to 10-times lower than current optical-based 10G Ethernet products, Stern adds.

The new Solarflare may find itself in a situation where it is supplying 10GBase-T physical layer (PHY) components to NIC vendors that are now its competitors — Neterion and Chelsio, among them. But "there's a level of co-opetition in most businesses," Stern says. Solarflare also sells chips to switch vendors such as Cisco, Force10, Foundry, Extreme and Nortel, among others.

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