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Marvell Is Benevolent Host to Cavium

December 19, 2017

Author: Bob Wheeler

Acquiring Cavium is the next stage in Marvell’s turnaround. After a major restructuring that followed the departure of its founders, the acquirer has regained a solid financial footing but earns half its revenue from the storage market. Cavium brings mostly complementary products for the networking market, helping diversify Marvell’s business and boost growth.

Marvell is funding the Cavium acquisition, valued at about $6 billion, through a combination of cash and $1.75 billion in new debt. Cavium shareholders will receive roughly half cash and half Marvell shares, with the offer representing a 17% premium over Cavium’s share price before news of the deal leaked; they will own about 25% of the combined company. The companies expect the deal will close by mid-2018.

Marvell is about twice the size of Cavium in both revenue and headcount. Their similar revenue-per-employee levels reflect their common fabless business model, outsourcing nearly all manufacturing functions. The acquisition will return Marvell to a revenue level it last achieved in 2015 before exiting the mobile market, in which it was losing money.

Although both companies serve the storage and networking markets, their product lines have little overlap. The exceptions are in certain embedded processors and Ethernet switches, but the latter is a new segment for Cavium. Marvell will consolidate redundant functions and facilities, but it plans to fuel growth through high R&D spending relative to its peers.

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