Marvell’s $1.1B Data Center Bet Continues With Innovium Buy

Marvell Technology is buying networking chip startup Innovium to expand its data center portfolio and market share with large cloud providers like AWS, Microsoft and Google.

Chipmaker Marvell Technology is acquiring data center networking chip startup Innovium for $1.1 billion in a move to boost its hyperscale cloud data center market presence, targeting the biggest data center spenders in the world, including Amazon Web Services, Microsoft and Google.

Data center capex spending by hyperscale operators—led by AWS, Microsoft, Google and Facebook— reached $38 billion in just the first quarter of 2021 alone, according to IT research firm Synergy Research Group.

“Our acquisition of Innovium and its complementary offerings further extend Marvell’s leadership in the cloud, and I am excited that Innovium has secured significant share at a marquee cloud customer,” said Marvell President and CEO Matt Murphy in a statement. “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.”

Marvell’s upcoming purchase of Innovium comes just a few months after the Santa Clara, Calif.-based company’s $10 billion acquisition of fellow semiconductor company Inphi in April, whose chips connect data center switches to fiber optic cables.

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Marvell is a fast-growing $3 billion semiconductor standout whose stock has jumped more than 70 percent over the past 12 months, currently trading at $60.40 per share as of Monday morning.

Marvell is looking to leverage Innovium’s high-performance switching silicon offerings for cloud and edge data centers as well as its customer base of cloud and original design manufacturers (ODMs).

From first quarter 2020 to first quarter 2021, hyperscale operators spent nearly $150 billion mostly on expanding, building, colocation and equipping massive data centers, known as hyperscale data centers, according to new data by Synergy Research Group. The biggest capex spenders over the past 12 months were Amazon Web Services, Microsoft, Google and Facebook, followed by Apple, Alibaba and Tencent.

“For hyperscale operators, the pandemic proved to be more of a stimulus to growth rather than a barrier,” said John Dinsdale, a chief analyst at Synergy Research Group, in an email to CRN. “Over the last four quarters, we continued to see extremely strong growth in revenue, capex and data center spending.”

Dinsdale said given the ongoing growth in service revenue for hyperscalers and the “ever-increasing need for a larger global data center footprint,” Synergy is forecasting double-digit growth in hyperscale capex over the next several years.

Marvell said the data center market for merchant Ethernet switch silicon is estimated to grow to $2 billion by 2026, representing a compound annual growth rate of 15 percent annually. Marvell said Innovium will generate $150 million in incremental revenue next fiscal year.

Innovium’s flagship Teralynx family offers software-compatible products ranging from 1 Tbps to 25 Tbps with telemetry, low latency, programmability and large buffers, as well as a feature-rich architecture that scales to 100 Tbps, according to the company.

Under the terms of the agreement, Innovium shareholders will receive $1.1 billion in consideration consisting of approximately 19 million shares of Marvell common stock that will be issued in aggregate in exchange for all outstanding equity of Innovium. The $1.1 billion price tag 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 for both Marvell and Innovium have approved the transaction. The deal is expected to close by the end of 2021.