On Monday, Marvell Technology announced it intends to acquire embedded chip maker Cavium in a deal worth $6 billion. When it’s done, the combined company will have $3.4 billion in annual sales. That's hardly Intel territory, but their chips will be in practically every piece of equipment in your data center.
There has been quite a bit of consolidation going on in the chip industry as every player gobbles up a competitor or complimentary vendor to give them a competitive advantage and diversification of products. Only Nvidia seems to be staying out of this, content to compete with what it has. And who can argue with the results? Certainly not its shareholders.
Marvell said the combined product lines of the two firms will put Marvell and Cavium products in virtually every corner of the data center. The combined product portfolios will offer “comprehensive end-to-end solutions for customers across the cloud data center, enterprise and service provider markets, and expands Marvell's serviceable addressable market to more than $16 billion,” the company said in a statement.
Marvell's growth over the years
Marvell started out in 1995 as a maker of storage controllers, and its controllers are found in most hard disks and SSDs today. These days, the company is more known for networking chips, especially for wireless networking.
It has a line of ARM processors called Armada that it acquired from Intel in 2006 thanks to a little short-sightedness on Intel’s part. The Armadas are focused primarily on the embedded market and not the data center, like Cavium has been, but it’s still a melding of two very good ARM teams.
Cavium designs custom SoCs for a wide variety of IT hardware, notably networking connectivity and security equipment. It has also been making waves with its ThunderX2 ARM processors aimed at enterprise servers and recently landed deals with Cray and HPE.
Between the two, you have the potential for server CPUs, network and wireless controllers, storage controllers, network storage, Fibre Channel, and Ethernet switches all from a single provider, and that’s before the combined engineering teams start looking for synergy, such as connecting the security controllers to network and storage controllers. Cavium has a long history with telcos with its MIPS-based SoCs, so those customers will be a natural for Marvell to pursue.
MarvellThe only thing the combined company doesn’t have is memory, and that’s a solid, well-consolidated market. They won’t be buying Micron, Hynix, or Samsung or Toshiba’s memory businesses any time soon. The opposite could occur, but that’s speculation on my part.
For now you have two companies with minimal overlap that together will be greater than the sum of their parts, assuming the merger goes smoothly. You never know with these.
Plus, one thing concerns me. Marvell will have $1.75 billion in new debt once this deal closes. That’s a lot for a company of modest revenue. Debt can be crippling for a growth company, and Marvell said in its presentation that the data center accounts for only about 10 percent of revenue.