UPDATED 04:32 EDT / JUNE 16 2016

NEWS

Cavium acquires QLogic to beef up its data center portfolio

Data center chip specialist Cavium Inc. has just acquired QLogic Corp. with a view to taking on rivals Intel, Broadcom Corporation and Mellanox Technologies in the storage and networking arena. The billion-dollar plus deal pairs one of the fastest-growing semiconductor manufacturers with a company that’s seeing renewed growth following a period of decline.

Cavium said it’s buying QLogic for $15 a share, which values the deal at $1.36 billion. The company will pay $11 a share in cash, with the rest made up of 0.098 Cavium shares per QLogic share.

The deal means that Cavium gets its hands on QLogic’s Fibre Channel and Ethernet controllers and boards, complementing its own line up of communications, security and general-purpose data center chips. It means Cavium can position itself as more of a full-line data center supplier, and also brings the company a mature software stack in networking and storage. In addition, Cavium said the deal will provide it with operational savings of around $45 million a year by the end of 2017.

In a press release, Cavium officials said that by merging with QLogic, the newly combined firm will be able to create new products targeting over $2 billion worth of new opportunities among cloud, data center, enterprise, and telco customers. The combined firm already has an impressive looking customer base, with the likes of Hewlett-Packard Enterprise, Dell Inc., IBM, ECM Corp., NetApp Inc. and Pure Storage Inc. among its most important customers.

Cavium added that QLogic’s purchase will add between $0.60 and $0.70 per share to its 2017 non-GAAP earnings. The deal will also allow Cavium to scale better due to increased revenues of around $1 billion a year. It said cost savings will come from consolidating sales, IT, research and development and manufacturing efficiencies.

The deal is expected to close by the end of Q3, 2016.

Photo Credit: Sentifiag via Compfight cc

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