UPDATED 13:14 EST / AUGUST 03 2021

INFRA

Marvell inks $1.1B deal to acquire network chip startup Innovium

Chipmaker Marvell Technologies Inc. today announced that it has inked a $1.1 billion deal to buy Innovium Inc., a startup with a line of processors used by cloud providers to power their data center networking infrastructure.  

Publicly-traded Marvell is financing the acquisition entirely with shares of its common stock. The company expects that Innovium will add $150 million to its annual revenues in the 2023 fiscal year and sees the deal becoming accretive to earnings per share even sooner.

The individual servers and storage devices that make up a data center are connected to one another by switches that handle the logistics of transferring information between systems. Those switches, in turn, move the information not with standard central processing units but rather using highly specialized networking chips. Until a few years ago, practically all of those specialized chips were made by Broadcom Inc., which in 2017 was estimated to have a market share of more than 90%.

San Jose, California-based Innovium makes competing chips for data center switches. Within two years of launching its first product, the startup captured a 20% share of the market and won deals with several major data center operators. Last July, after raising $170 million in funding, Innovium disclosed that most of the world’s 25 largest cloud providers were either using its chips in production or testing them. 

Acquiring the startup will enable Marvell to capture a bigger portion of the billions of dollars that cloud providers spend annually on data center hardware. This spending is only set to increase as more enterprises move their workloads to the cloud. 

Marvel disclosed today on occasion of the acquisition news that  Innovium has won a contract to become a “significant supplier at a Tier 1 cloud customer.” That deal is expected to significantly increase the startup’s revenue in 2022. Moreover, Innovium is currently in talks with several other cloud data center operators to supply switch processors for their infrastructure.

Innovium offers three different switch processors: the Teralynx 5, Teralynx 7 and Teralynx 8. The latter processor is the most powerful of the series, with the capacity to transport up to 25.6 terabits of information per second.

All three chips also have a large built-in buffer. A buffer is a set of circuits for temporarily holding the information being processed by a chip. Normally, these circuits are deployed separately from the processor, but Innovium has opted to build them directly into its Teralynx chips. The startup claims that the result is a decrease in latency-related network delays and a lower risk of packet drops, the phenomenon where some of the data being sent across the network fails to reach its destination.

Power efficiency is another area where Innovium claims an edge over the competition. According to the startup, its chips can operate with double the power efficiency of rival products. This has the potential to add up to a lot of saved energy in the kind of large cloud data centers that Marvell plans to target using Innovium’s technology. 

“The unified company will have increased scale and breadth to be a market leader,” stated Innovium founder and Chief Executive Officer Rajiv Khemani. “We will deliver significant value for customers by providing architectural choice and flexibility to meet a diverse set of requirements.”

“Innovium has established itself as a strong cloud data center merchant switch silicon provider with a proven platform,” added Marvell president and Chief Executive Officer Matt Murphy. “We look forward to working with their talented team who have a strong track record in the industry for delivering multiple generations of highly successful products.”

Innovium’s technology will complement Marvell’s existing portfolio of networking chips. The company obtained much of the portfolio through another recent acquisition, the $10 billion purchase of Inphi Corp. it announced last year. 

Inphi’s specialty was developing chips for powering data center networks that transmit information using fiber optic cables. Its chips are used for, among other tasks, detecting and filtering the errors that are often created in data while travels across a network.

Publicly-traded Marvell also has a presence in several other parts of the data center chip market. The company makes server CPUs, a line of data processing units for performing tasks such as encryption and chips that are used to manage how information is transferred to and from flash storage drives. Marvell supplies silicon to other industries as well: the company makes networking hardware that automakers use to connect their vehicles’ onboard electronics with each other.

In conjunction with the news that it’s buying Innovium, Marvell today released its preliminary  revenue guidance for the second fiscal quarter. The company is expecting revenues of $1.065 billion plus or minus 1.5%, which is in line with the consensus estimate of analysts polled by Refinitiv. 

Photo: Marvell

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