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 $US50 million in cash, is keeping the Solarflare name. Prior to the merger, Solarflare and Level 5 had raised $US78 million and $US39 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.

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.

Founded in 2001, Level 5 has partnerships with Sun, HP, Dell, IBM and Intel. The company's EtherFabric architecture distributes separate, virtual TCP/IP software stack to each application running on a server (as opposed to all applications having to access a single TCP/IP stack embedded in the operating system). Its hardware is designed to give each application direct access to the memory space on the NIC hardware, thus eliminating the need for applications to copy data to system memory, which causes higher CPU utilization and introduces latency into server I/O performance.

"The new Solarflare now has a significant software portfolio," with the addition of the EtherChannel technology," Stern says. "We're combining software and Ethernet system expertise, right down to the physical layer. So it's a great complement."