MOUNTAIN VIEW, Calif. -- Cavium Networks (NASDAQ:CAVM - News), a leading provider of semiconductor products that enable intelligent processing for networking, communications and the digital home, announced today that it is has signed a definitive agreement to acquire China-based privately held Celestial Semiconductor, a fabless semiconductor company headquartered in Beijing, China with centers in Shenzhen and Shanghai. Celestial is a fast growing provider of ARM-based system-on-a-chip (SoC) processor solutions for a range of digital media applications.
The net purchase price of the acquisition will be approximately $55 million, to be paid in a combination of cash and stock. In addition, there is an earnout provision whereby the purchase price can increase by up to $10 million contingent on achieving certain revenue milestones during the following 12 months. The acquisition is expected to close by the end of the first quarter of 2011. Cavium Networks expects this acquisition will be non-GAAP earnings neutral during the first half of 2011 and modestly accretive by the second half of 2011.
Video traffic has been growing exponentially and is forecasted to be over 91% of all consumer traffic on the internet by 2014 according to Cisco's Visual Networking Index study. The main drivers for this growth are the delivery of TV, VoD, Internet video, P2P traffic and video conferencing. Furthermore video is being delivered over cable, satellite, fiber and mobile networks in many different formats including MPEG 2, H.264/AVC, AVS, Adobe Flash, Google WebM, Apple Quicktime, Microsoft WMV9 and a growing number of 3D formats.
Celestial products have been designed into a range of devices such as set top boxes (STB), IPTV, Interactive TVs, Net multimedia players, and portable media players being deployed by cable and telecom media service providers, Interactive cable operators, multiple system operators (MSO) in China and other emerging geographies.
"Our highly integrated SoC processors enable feature rich, low cost and low power solutions that are being adopted by major telcos and service providers in China and other geographies. We are excited about leveraging Cavium Networks' world-class engineering, operations, sales and support resources to accelerate our reach to a broader set of worldwide customers," said Daniel Fu, CEO of Celestial Semiconductor. "Our complementary market focus and product technology synergies will reduce our development time and help our clients speed their time to market."
Cavium Inc. (Nasdaq: CAVM)