Chipmaker Cavium is buying its way into the SDN components market with the $75 million acquisition of high-density Ethernet switching silicon startup Xpliant Inc., a "stealth mode" company in which it has already invested.
Cavium says the acquisition will help it cater to "the need for increased capacity in both networking infrastructure and data centers driven by the steep growth of mobile applications and social networking," and give it a product line that meets the needs of next-generation switching equipment manufacturers.
According to Cavium, current switch solutions are too limited and inflexible for the future software-defined networking needs of data center and network operators, a clear dig at Ethernet switch silicon market leader Broadcom Corp. (Nasdaq: BRCM).
San Jose, Calif.-based Xpliant, though, has designed products "to specifically address the challenges of throughput and flexibility driven by the needs of next generation networking infrastructure and software defined networking," according to Cavium. Its chips "will enable increased intelligence and flexibility... while delivering market leading bandwidth, throughput and scalability along with unprecedented flexibility and programmability," all characteristics required to "enable virtualized data center and software defined networking."
Cavium, best known for its LTE and small cells chips, says it should be able to use the Xpliant silcion alongside its own ThunderX, OCTEON and LiquidIO platforms. (See Integrated Components Accelerate LTE and MWC 2014: Single-Mode 4G Small Cells Ahoy?)
Cavium says the total acquisition cost will be $90 million, but it has reached this figure by including the $15 million it has previously invested in Xpliant through June 2014. The remaining $75 million will be comprised of approximately $40 million in cash and $35 million in stock.
In total, Xpliant is believed to have raised about $18 million.
Cavium unveiled its acquisition plan as it announced second quarter revenues of $90.7 million, up 22% from a year earlier, and earnings after one-time costs (non-GAAP) of $19.9 million, or 35 cents per share, slightly better than financial analysts had expected.
Cavium's stock gained 3.4% during Thursday trading, and added a further 1.2% in after-hours trading to reach $47.80
— Dan Jones, Mobile Editor, Light Reading