Marvell to buy chip startup Innovium for $1. 1 B

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On Tuesday, Inc said it had agreed to buy chip startup Innovium in a $1.1 billion all-stock deal aimed at bolstering Marvell's share of networking chips sold to large cloud computing companies.

Marvell's rival, Broadcom Inc, dominates the market for chips that go into switches that help move digital information around inside massive data centers owned by cloud players like Amazon Web Services, Microsoft Corp. and others. In a step towards getting into that market last year with its $10 billion buy of Inphi Corp, whose chips help connect switches to fiber optic cables.

by contrast Innovium's chip sits at the heart of the switches and competes directly with Broadcom. In an interview with Reuters, Marvell Chief Executive Matt Murphy said the company's long-term strategy is to integrate the Innovium and Inphi products to deepen its ties with cloud computing vendors, which are some of the largest spenders in the world on chips.

Microsoft, for example, had $24.2 billion in capital expenditures last year, much of it was spent on data centers.

Innovium private companies is expected to generate $100 million in revenue in its next fiscal year. Under the terms of the deal, Marvell will pay $1.1.1 billion in stock but take on $145 million in cash from Innovium's balance sheet, resulting in a net cost to Marvell of $955 million.

Marvell also said it expects revenue of $1.065 billion, plus or minus 1.5%, when it reports earnings on August 26, in line with analyst estimates, according to IBES data from Refinitiv.