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Avago Looking to Acquire Marvell – Rumor

Sarah Thomas
7/17/2015
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Fresh off of its purchase of Broadcom, Avago is eyeing another acquisition -- that of fellow semiconductor vendor Marvell, Light Reading has learned.

A reputable source tells us that Avago Technologies Pte. is looking to make a bid for Marvell Technology Group Ltd. (Nasdaq: MRVL). Marvell is a direct competitor to Broadcom in several key market areas, including home networking and wide area networking equipment. Avago announced in May it was acquiring Broadcom for $37 billion. (See What Will Avago Do With Broadcom? and Avago Seals Deal to Buy Broadcom for $37B.)

Avago has been on an M&A binge of late as it also purchased Emulex in February and LSI for $6.6 billion in December 2013, although it divested much of LSI to Intel Corp. (Nasdaq: INTC) and Seagate Technology LLC (Nasdaq: STX). (See Avago Eyes Enterprise Storage With Emulex Buy and Avago to Buy LSI for $6.6B.)

Heavy Reading analyst Simon Stanley, who covers the chip market, has not heard the rumor, but notes that Marvell is one fifth the size of Broadcom, so market cap shouldn't be an issue, especially once Avago has Broadcom's buying power under its belt. Yet whereas Avago and Broadcom were primarily complementary, Broadcom and Marvell have significant overlap.

"If I was a customer I would be concerned about the reduction in competition," Stanley comments. "On the other hand it would help Avago build a dominant position in these markets."


Got a hot tip or scoop for Light Reading? Send it to editors@lightreading.com. Anonymity assured (within reason).


Real Wireless consult and UltraSoC CEO Rupert Baines hadn't heard the rumor either, but thought it may be too soon following its acquisition of Broadcom.

If it is true, however, he says Avago could be following the model of how Cisco Systems Inc. (Nasdaq: CSCO) operated in the 1990s: "acquire; market cap grows by a bit more than the sum of the two, which means they could acquire someone bigger, and the fact [that] you are growing fast means your shares go up more, so you can afford something bigger still."

It's lifting yourself up by the bootstraps, Baines says, "but it is a pretty grueling routine, and I am not sure investors would feel comfortable."

Avago was spun out of Agilent in 2005. It has a history with Marvell as well. Marvell actually acquired Avago's printer semiconductor business back in 2006 for $240 million. (See Agilent Becomes Avago and Avago IPO's a Go.)

Neither Avago nor Marvell responded to a request for comment at the time of publication.

— Sarah Thomas, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editorial Operations Director, Light Reading

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dandan123
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dandan123,
User Rank: Light Beer
7/26/2015 | 6:34:11 PM
This makes absolutely no sense at all

Putting asside anti-trust issues, this simplay makes absolutely no sense, at all.

Marvell is widely considered as a badly managed, crappy company with a poor product line.
These guys have been losing to Broadcom and Qualcomm pretty much on every socket they've competed on.

Why on earth would Avago/Broadcom even consider buying them.. ?
Sounds like someone is trying to dump Marvell stocks, fast.
kq4ym
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kq4ym,
User Rank: Light Sabre
7/21/2015 | 3:05:49 PM
Re: Marvell's moble SoC business
I wonder how true it may or may not be that "market cap grows by a bit more than the sum of the two, which means they could acquire someone bigger, and the fact you are growing fast means your shares go up more." If true the race should be on by all smaller firms to acquire their bigger competitors.
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
7/20/2015 | 11:59:10 AM
MKM investment note
MKM got in touch about our article and said it's telling its clients:

Lightreading is reporting that a "reputable source" says AVGO will make a bid for MRVL.  We retain a degree ofskepticism given Lightreading's lack of track record.  Furthermore, nearly 100% of MRVL's business would face significant anti-trust issues or is unattractive, in our opinion: (1) MRVL's storage business competes with LSI, (2) their networking business competes with BRCM, and (3) their wireless chipset business is considered unattractive.   

We would point to our recent INTC for ALTR  note, The Future in Semis Looks a Lot More Like The Retro 90's on why fabless models such as MRVL are attractive for consolidation, though not necessarily by AVGO in this particular case.

 Marvell Technology Group Ltd. (MRVL, Buy, $12.78, $16 PT)

Avago Technologies Limited (AVGO, Buy, $134.70, $160 PT)

Intel Corp. (INTC, Buy, $29.90, $40 PT)

Altera Corporation(ALTR,NR, $50.32)

Broadcom Corporation Class A(BRCM,NR, $53.43)

 

mhui0
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mhui0,
User Rank: Lightning
7/18/2015 | 11:23:59 AM
Marvell's moble SoC business
I hope Marvell's moble SoC business is saved and strengthened if the acquisition goes through. Competition in that space has been brutal, and Marvell has a very competitive offering; just not the name recognition that Qualcomm has enjoyed up to now.
danielcawrey
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danielcawrey,
User Rank: Light Sabre
7/17/2015 | 9:09:08 PM
Re: chip chatter
Marvell does some interesting things, using ARM to build a whole bunch of different microprocessor applications. I like them, and I also agree with the idea that Avago could be like a smaller Cisco in how it goes after companies going forward. It's a viable strategy given how quickly things change in technology. 
Sarah Thomas
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Sarah Thomas,
User Rank: Blogger
7/17/2015 | 2:25:06 PM
chip chatter
I will update as soon as I hear back from Marvell and Avago, of course. What do you all think? Would this create a semiconductor vendor that can't be beat, or would it be a bad, costly move for Avago?
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