Why Marvell (MRVL) Is Buying Innovium For $1.1 Billion

By Amit Chowdhry ● Aug 4, 2021
  • Marvell Technology, Inc. (NASDAQ: MRVL) recently announced it is buying Innovium in a $1.1 billion deal. These are the details.

Marvell Technology, Inc. (NASDAQ: MRVL), a leader in infrastructure semiconductor solutions, and Innovium, a leading provider of networking solutions for cloud and edge data centers, announced recently a definitive agreement under which Marvell will acquire Innovium in an all-stock transaction. Marvell is known for having an extensive portfolio of Ethernet switch semiconductor solutions with a strong and growing position in the enterprise and carrier segments it services with a broad portfolio of feature-rich products.

And given Marvell’s growing momentum in the cloud data center market — which was further enhanced with the recent acquisition of Inphi — developing dedicated high radix and performance-optimized switch silicon for use in hyper scale data centers is of growing strategic importance.

Innovium’s TERALYNX switching architecture delivers low latency, optimized power, high performance, and innovative telemetry that are critical in today’s cloud-scale data centers. And the company has steadily grown to become a strong supplier in the merchant cloud semiconductor switching market. The planned acquisition of Innovium enables Marvell to immediately participate in the fastest-growing segment of the switch market with a cloud-optimized solution.

Going forward, Innovium was selected to become a significant supplier at a Tier 1 cloud customer and this is expected to drive a significant revenue ramp in calendar 2022. Plus Innovium is currently engaged with several other leading cloud data center customers in building out their future network architectures.

By calendar year 2026, the data center market for merchant Ethernet switch silicon is estimated to grow to approximately $2 billion at a 15% CAGR. And Marvell’s scale and leading technology platform will enable the extended team to accelerate their roadmap in this large and fast-growing market.

The addition of Innovium is going to provide Marvell with incremental engineering resources to focus on cloud-optimized silicon through the TERALYNX platform as the 9K product family while continuing to drive its Prestera 2K to 8K product families for the enterprise and carrier switch market. And dedicated architectures will accelerate Marvell’s ongoing growth in the 5G, cloud, enterprise, and automotive end markets, which all leverage Marvell’s Ethernet platform.

Marvell is expecting the acquisition of Innovium will enable the addition of approximately $150 million in incremental revenue next fiscal year. And the transaction is expected to be neutral to Marvell’s non-GAAP earnings per share in the first full quarter after the transaction closes and accretive in the first full fiscal year thereafter.

Innovium CTO and founder Puneet Agarwal — who has more than 20 years of experience in defining and architecting groundbreaking products — will join Marvell after closing of the transaction. And he will be joined by the talented team from Innovium who will continue to drive the cloud-optimized switch program within the combined company. Innovium CEO Rajiv Khemani is going to serve as an advisor to Marvell post-close.

Deal Terms

Under the terms of the definitive agreement, Innovium shareholders are going to receive $1.1 billion in consideration consisting of approximately 19.05 million shares of Marvell Common Stock that will be issued in aggregate in exchange for all outstanding equity of Innovium, including shares of Innovium’s Preferred and Common Stock, employee equity awards, warrants and other rights of Innovium. And the acquisition price of $1.1 billion is based on Marvell’s 10-day VWAP as of July 30, 2021. 

This acquisition price includes Innovium cash and exercise proceeds expected at closing of approximately $145 million, resulting in a net cost to Marvell of $955 million. The board of directors of both companies have approved the transaction. The deal is expected to close by the end of calendar 2021, subject to the satisfaction of customary closing conditions, including approval by Innovium’s shareholders and applicable regulatory approvals.

KEY QUOTES:

“Our acquisition of Innovium and its complementary offerings further extends Marvell’s leadership in the cloud, and I am excited that Innovium has secured significant share at a marquee cloud customer. Innovium has established itself as a strong cloud data center merchant switch silicon provider with a proven platform, and we look forward to working with their talented team who have a strong track record in the industry for delivering multiple generations of highly successful products.”

  • Matt Murphy, President and CEO of Marvell

“The Innovium vision is centered on delivering breakthrough switch silicon and choice for next-generation cloud and edge data centers. Bringing technology leadership and customer-focused innovation to the market is what drives our team every day. I want to recognize and thank our valued employees for their passion, commitment, and outstanding execution. We are excited to join Marvell and accelerate the growth of our business, partnerships, and solution value while contributing to the company’s fast-growing cloud opportunity.”

  • Rajiv Khemani, CEO and Founder of Innovium