Metamako Buys xCelor’s Hardware Ops to Grow Switch Business

Officials say the acquisition—Metamako’s first since its launch in 2013—will see it focus on devices and core applications for a range of uses or as part of more complex solutions, while xCelor will focus on its applications business, which offer feed handling and bandwidth management solutions.

The deal will also see xCelor leverage Metamako’s platforms—including those components acquired from xCelor—to run its trading applications in the future. “With Metamako providing a stable and flexible hardware base, we (xCelor) can focus on business logic without worrying about the underlying infrastructure,” says xCelor CTO Rob Walker. 

Selling its hardware business means xCelor can now focus on building applications that solve the trading challenges facing its customers, Walker says. 

“By offering these applications on the Metamako platform, [xCelor] and its clients will get the benefit of all of Metamako’s greater and wider capabilities,” says Metamako CEO Kevin Covington. “[xCelor’s] focus is on continuing, delivering and developing applications that it has developed over time for trading and supporting trading infrastructure. What we have effectively done is acquired the assets of its hardware switching business, so it can step away from that and… increasingly develop applications on Metamako’s business.”

In the short-term, Metamako’s primary driver is to work closely with xCelor’s remaining applications business so that Metamako can support its applications and xCelor can optimize its offering on Metamako’s devices. “We are working with [xCelor’s] hardware customers on how they want to move forward as they refresh and grow, and possibly buy new product. [xCelor) was as determined as we were that we have a long-term plan to look after its existing customer base and to promote new and better offerings for those customers, with the view that they will move with us both in the long-term,” Covington says.

‘Taking Over the Obligation’

Metamako will fund the acquisition via reinvestment of its year-on-year growth, Covington says. Since the acquisition is purely an asset purchase—because xCelor previously sub-contracted most of its hardware-related activities to third parties—Metamako has not needed to add headcount as a result of the deal, he adds. 

As part of the acquisition Metamako acquired all the designs, expertise, and contracts with xCelor’s manufacturers, so it can continue to meet its obligations to customers, and the vendors have a transition arrangement for xCelor to provide Metamako with help or assistance as needed.

“We’ve effectively taken over the obligation of supporting and managing those customers from a platform perspective. If an existing customer today has a support query or if a device becomes faulty it will be up to Metamako to resolve that issue for the customer. As part of the whole acquisition we have acquired the capability and the know-how to enable us to continue supporting those customers. Likewise, xCelor will work with us if there’s an application problem,” Covington says, adding that there will not be any physical change to existing xCelor devices. “If we manufactured a new device it’ll come out with the xCelor front panel on it. But from a customer perspective, they will be ordering, contracting and being serviced by Metamako rather than xCelor. For all intents and purposes, they’d be buying a Metamako device because the obligation to provide service and support will be Metamako’s obligation and not xCelor’s.”

Metamako opened its office in Chicago about a month ago—partly in anticipation of making this acquisition—and has since made several new hires to allow it to extend into new verticals such as telecommunications, datacenters and security. “We have now established a local presence in Chicago. We have lots of customers in that area anyway. This way we can also work closely with xCelor,” Covington says.