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Marvell's rival, Broadcom Inc, currently dominates the market
for chips that go into the switches that help move digital
information around inside massive data centers owned by cloud
players like Amazon Web Services, Microsoft Corp and others.
Marvell took a step toward getting into that market last year
with its $10 billion purchase of Inphi Corp, whose chips help
connect the switches with fiber optic cables.
Innovium's chip, by contrast, sits at the heart of the switches
and competes directly against Broadcom. In an interview with
Reuters, Marvell Chief Executive Matt Murphy said the company's
long-term plan is to integrate the Innovium and Inphi products
to deepen its ties with cloud computing vendors, which are some
of the largest spenders in the world on chips.
Microsoft, for example, had $24.2 billion in capital
expenditures last year, much of it spent on data centers.
"If you just look at all the semiconductor end markets and where
the biggest growth is going to come from over the next five to
10 years across the whole chip industry, it's just breathtaking
if you look at the capital expenditure commitments these
companies are making," Murphy said.
Privately held Innovium is expected to generate $150 million in
revenue in its next fiscal year. Under the terms of the deal,
Marvell will pay $1.1 billion in stock but take on $145 million
in cash from Innovium's balance sheet, resulting in a net cost
to Marvell of $955 million.
Marvell also said it expects revenue of $1.065 billion, plus or
minus 1.5%, when it reports earnings on Aug. 26, in line with
analyst estimates, according to IBES data from Refinitiv.
(Reporting by Stephen Nellis in San Francisco; Editing by Dan
Grebler)
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