Marvell Technology has announced a $6 billion acquisition of its prime rival, Cavium Inc. The new combined company will now be worth almost $3.4billion annually.
The move is a solid score for Marvell, since its revenue is likely to diversify after the acquisition. The additional manpower also means that the company will be better equipped to compete with its fast growing competitors. Marvell’s biggest competitors are Intel and Broadcom. While Intel already has a relatively large market base, Marvell’s core competition is likely to be with Broadcom.
In the past few weeks, Broadcom has put in a substantial bid to acquire the chipmaker, Qualcomm. However, just last week, Qualcomm rejected the bid and stated the offered amount, had left it short-handed.
Although Qualcomm rebuffed its advances, Broadcom is still hopeful of seeing the deal come through. For its part Qualcomm is looking to expand as well and has put in a bid to acquire NXP. If Qualcomm is successful in its endeavor, its worth is likely to rise.
Looking to battle all these uncertain odds, Marvell went ahead and acquired Cavium to give itself some reinforcement against the changing market. Marvell stated that it would pay $40 a share in cash for the company along with 2.1757 in Marvell shares for each Cavium share.
Estimates state that the new combined company is likely to make up to $3.4 billion in annual revenue. Marvell and Cavium believe that the merger will leave them with more resources to sell to cloud providers, and any enterprise which requires its own data centers. Marvell’s core goal is to use the combined resources to offer its customers greater variety in the product menu.
The combination is likely to become a stronghold in the semiconductor industry. According to reports, the transaction is expected to produce between $150 million- $175 million in annual savings within the first 18 months alone.