Chip vendor Cavium is expanding its reach today with the acquisition of networking infrastructure provider QLogic for $1.36 billion. The deal is expected to close in the third quarter of this year.
"QLogic’s industry leading products extend our market position in data center, cloud and storage markets, and further diversifies our revenue and customer base," Syed Ali, President and Chief Executive Officer of Cavium, said in a statement. "In addition to the compelling strategic benefits, the manufacturing, sales and operating synergies will create significant value for our shareholders."
In an investor presentation outlining the deal, Cavium noted that QLogic has a strong intellectual property portfolio, with 378 granted patents and 78 pending patents, and design wins for next-generation Ethernet, including 10/25/50 and 100 Gbps technologies and 16 and 32 Gbps Fibre Channel storage adapters.
Cavium sees the QLogic product portfolio as highly complementary to its existing business across mutliple market verticals, including networking communications equipment, switches, servers and storage equipment. Cavium's core revenue-driving products today are its Nitrox and Octeon chips, which are widely used in networking equipment today, while QLogic develops and builds Ethernet and converged Network Interface Cards (NICs) and Host Bust Adapters (HBAs).
With the acquisition of QLogic, Cavium's management believes it can now more effectively go after a larger target addressable market (TAM) for infrastructure opportunities. According to Cavium, QLogic's market-leading advanced connectivity and storage solutions expand Cavium's footprint by adding an incremental $2 billion in TAM.
While there is 60 percent customer overlap today between Cavium and QLogic, that overlap is less than 10 percent in terms of revenue. That translates into a larger opportunity for the combined company to cross-sell technologies to the expanded customer base.
"QLogic with Cavium is a winning combination for customers and employees and is financially compelling for QLogic shareholders," Christine King, Executive Chairman of QLogic, said in a statement. "The scale of operations of a nearly $1 billion revenue business will allow the combined company to deliver better solutions for customers and create more career opportunities for employees."
Cavium has made other acquisitions in recent years to expand its networking footprint. In 2014, Cavium acquired SDN vendor Xpliant for $90 million.
Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.