Marvell Technology Buying Rival Chipmaker Cavium for $6b

Chipmaker Marvell Technology Group Ltd said on Monday it would buy smaller rival Cavium Inc for about $6 billion, as it seeks to expand its wireless connectivity business in a rapidly consolidating semiconductor industry.

Shares of Marvell were down 0.8% to $20.14, while Cavium was up 7% at $81.14 in early trading, Reuters reported.

Chief Executive Matthew Murphy, who took the top job a year ago, has been focusing on Marvell’s networking business to counteract declining demand for its chips used in hard disk drives of personal computers.

Analysts say the new leadership is preparing a number of important new product launches for later this year after refreshing 25 products in 18 months. The deal is Murphy’s first acquisition at the company.

“With Marvell facing secular challenges on its core chip business, this acquisition is a smart strategic move which puts the company in a stronger competitive position for the coming years,” said GBH Insights analyst Daniel Ives.

A buyout of Cavium would give a boost to the networking ambitions of Marvell, which has clients such as network giants Cisco Systems Inc and Juniper Networks.

Marvell and Cavium combined would be able to better compete with bigger rivals Intel Corp, Qualcomm and Broadcom, Stifel analyst Kevin Cassidy said.

In the last two years, the chip industry has witnessed a series of deals as companies try to gain market share in emerging areas such as automotive technologies and connectivity.