Marvell and Cavium agreed the deal today, negotiating an arrangement for shareholders that includes $40 in cash and 2.1757 Marvell common shares for each Cavium stock unit. After the two companies have merged, the resulting firm will be around 25 percent owned by Cavium shareholders.
Data storage and telecoms
Marvell is a leading producer of semiconductors used in data storage components such as hard drives and memory modules. Cavium manufactures chips for networking gear and telecoms equipment. Combined, the two companies will have a significantly larger footprint and will be able to invest in new market areas. Marvell President and CEO Matt Murphy said it will result in a total “more than the sum of their parts.”
“This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,” said Murphy. “This combination expands and diversifies our revenue base and end markets, and enables us to deliver a broader set of differentiated solutions to our customers.”
Marvell and Cavium said they expect to use their combined product portfolio to develop their presence across several industries. These include the increasingly valuable data centre and enterprise cloud markets where future technological growth is being concentrated.
“Huge” potential
Although storage chips and networking components aren’t directly comparable, they’re both vital components inside server farms and cloud environments. The combined company will also have more substantial R&D capabilities to accelerate development of future products.
“Individually, our businesses are exceptionally strong, but together, we will be one of the few companies in the world capable of delivering such a comprehensive set of end-to-end solutions to our combined customer base,” said Cavium co-founder and CEO Syed Ali. “Our potential is huge. We look forward to working closely with the Marvell team to ensure a smooth transition and to start unlocking the significant opportunities that our combination creates.”
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The deal comes just a week after Qualcomm rejected an acquisition proposal from rival semiconductor giant Broadcom. It’s the latest example of consolidation in the semiconductor industry, a movement which could result in the creation of new chipmaking goliaths.
Broadcom is expected to continue its attempts to acquire Qualcomm through proxy methods, intending to improve its own market standing as it attempts to do battle with Intel. Intel will also be a threat to the combined Marvell and Cavium operation. Cavium has been attempting to break into the servers market using ARM-based chips, increasing its reach in an area currently dominated by Intel.
