Marvell Buys Cavium to Expand Product Range

The $6 billion deal will complement Marvell's chips for storage devices with Cavium's network and communications products.
Matthew HellerNovember 20, 2017
Marvell Buys Cavium to Expand Product Range

Marvell Technology said Monday it will acquire rival chipmaker Cavium in a $6 billion deal to expand its product range beyond its core business of making chips for storage devices.

The acquisition continues a wave of consolidation in the semiconductor industry as companies jostle for market share in emerging areas such as automotive technologies and connectivity. Earlier this month, Broadcom offered $105 billion to acquire Qualcomm.

Cavium’s focus is network and communications products, which would complement Marvell’s chips for data-storage devices. The combined company would have $3.4 billion in annual revenue, positioning it to compete with larger rivals such as Intel and Broadcom.

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Marvell’s offer of $84.15 per Cavium share represents a premium of 11% to Friday’s undisturbed closing price. In trading Monday, the stock was up 9.8% at $83.30.

“This is an exciting combination of two very complementary companies that together equal more than the sum of their parts,” Marvell CEO Matt Murphy said in a news release. “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.”

Murphy has been seeking to diversify Marvell’s offerings since taking over from co-founder Sehat Sutardja, who was ousted last year following a battle with activist investor Starboard Value. The Cavium acquisition is Murphy’s first.

“With Marvell facing secular challenges on its core chip business, this acquisition is a smart strategic move which puts the company in a stronger competitive position for the coming years,” GBH Insights analyst Daniel Ives told Reuters.

Marvell’s customers include network giants Cisco Systems and Juniper Networks. The company expects the combination with Cavium to “deliver comprehensive end-to-end solutions for customers across the cloud data center, enterprise and service provider markets” and generate at least $150 to $175 million in cost savings within 18 months of closing.

“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,” Cavium CEO Syed Ali said.