Global infrastructure semiconductor solutions provider Marvell Technology, Inc. (MRVL) inked a $1.1 billion all-stock deal to buy Innovium, Inc., a provider of networking solutions for cloud and edge data centers. Shares rose 1.3% to close at $61.34 on August 3.
Marvell serves clients in the enterprise and carrier segments, offering its portfolio of Ethernet switch semiconductor solutions. (See Marvell Technology stock charts on TipRanks)
With Innovium’s TERALYNX switching architecture, which delivers “ultra-low latency, optimized power, high performance, and innovative telemetry,” Marvell will be able to accelerate its growth in the 5G, cloud, enterprise, and automotive end markets.
Per the terms of the deal, Innovium shareholders will receive approximately 19.05 million of Marvell common stock in exchange for all outstanding common stock, preferred stock, employee equity rewards, warrants, and other rights of Innovium. The purchase price of $1.1 billion is based on Marvell’s 10-day volume-weighted average price at the close of business on July 30.
The deal is expected to close by the end of 2021, subject to shareholder and regulatory approvals.
Additionally, the purchase could add approximately $150 million of annual revenue in fiscal year 2023. The company expects the deal to be neutral to Marvell’s non-GAAP EPS in the first full quarter post-closing, and accretive to its first full fiscal year thereafter.
The data center market for merchant Ethernet switch silicon is forecasted to grow at a 15% compound annual growth rate to $2 billion by 2026. This acquisition will enable Marvell to position itself to gain from the rapidly growing market opportunity.
Marvell also stated that Innovium has been chosen as a major supplier by one of the Tier 1 cloud customers, which will significantly boost its revenue in the calendar year 2022.
Matt Murphy, President and CEO of Marvell, said, “Our acquisition of Innovium and its complementary offerings further extends Marvell’s leadership in the cloud…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.”
Following this news, Rosenblatt Securities analyst Hans Mosesmann reiterated a Buy rating on the stock with a price target of $70, implying 14.1% upside potential to current levels.
Mosesmann notes that Innovium’s Teralynx platform provides Marvell with the last “big” networking silicon opportunity that it did not have.
The analyst said, “We see Marvell on the cusp of mega cycles that will last for years in data center/cloud and 5G infrastructure with a portfolio of products/ IP and capabilities that we think approaches Broadcom’s infrastructure/data center capabilities.”
Overall, the stock commands a Strong Buy consensus rating based on 19 Buys and 3 Holds. The average Marvell Technology price target of $62.58 implies 2% upside potential to current levels. Shares have gained 63.6% over the past year.
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