The $1.36 billion deal also will enable Cavium to grow its customer base to include HPE, Dell and others and open up a $2 billion market opportunity.
Chip maker Cavium is bolstering its capabilities in the data center, cloud and storage spaces with its planned acquisition of networking equipment maker QLogic, a move that will expand its customer base and bring it into greater competition with such vendors as Intel and Broadcom.
Officials with Cavium, which has garnered a lot of attention over the past couple of years with its ARM-based ThunderX systems-on-a-chip (SoCs) for servers and other data center systems, said the $1.36 billion deal for QLogic will enable the company to offer more complete solutions to customers in enterprise, cloud and telecommunications environments and will open up a more than $2 billion market opportunity.
The deal is expected to close in the third quarter.
It also will make Cavium a more significant vendor in increasingly competitive markets like storage, networking and cloud that now include such players as Intel, Mellanox Technologies and a much larger Broadcom, which was bought last year for $37 billion by Avago Technologies
, which then took the Broadcom name.
In addition, the acquisition will significantly grow Cavium's customer base. According to company officials, there is a 60 percent overlap between Cavium and QLogic customers. However, there is little overlap in the top 10 customers, with Cavium counting such vendors as Cisco Systems, Nokia and Amazon, and QLogic having Hewlett Packard Enterprise (HPE), Dell, IBM, Lenovo, EMC and Fujitsu. Huawei Technologies is on both their lists of top 10 customers.
Cavium officials said that by the end of 2017, they will be able to cut $45 million in operating expenses and through synergies between the two companies in such areas as manufacturing and sales. The two vendors had worked together in the past, including in May 2015, when they announced a joint big data infrastructure offering that uses QLogic's 25 Gigabit Ethernet NICs with compute and storage nodes based on Cavium's 48-core ThunderX SoCs.
The QLogic acquisition "
is highly complementary and strategic to Cavium and it creates a diversified pure-play infrastructure semiconductor leader," Cavium President and CEO Syed Ali said in a statement. "QLogic's industry-leading products extend our market position in data center, cloud and storage markets, and further diversifies our revenue and customer base."
Cavium offers a growing array of silicon for a range of data center resources, including its XPliant silicon for Ethernet switches, ARM- and MIPS-based Octeon SoCs, and Nitrox security processors. Most recently, company officials last month at the Computex 2016 show introduced the ThunderX2 processors, which they said will deliver two to three times the performance of the ThunderX chips in data center and cloud workloads. Cavium also unveiled a range of workload-optimized variants of the new SoCs.
Also at Computex, officials unveiled the CloudScale Rack, a system based on OEM and original design manufacturer (ODM) platforms that are powered by a range of Cavium silicon and software, including ThunderX workload-optimized chips for compute, storage, big data and networking server applications; LiquidIO intelligent NICs for such networking tasks as load balancing, firewall, virtual machine acceleration and virtualized elastic storage; XPliant Flexible for Ethernet switches; and the LiquidSecurity appliance.
Cavium officials at the time said the CloudScale Rack is a way of bringing the company's products together to offer the industry a complete solution.
"Cavium is one of the few semiconductor companies with a comprehensive portfolio of products from switching to security to intelligent NICs and servers for the state of the art data centers today," Raghib Hussain, CTO, corporate vice president and general manager at Cavium, said in a statement. "Customers can build an efficient and scalable software defined data center based entirely on Cavium data center technologies."