Hey, everyone, this is Alex Kagin and I’m part of the team at Strategic Tech Investor. The tech markets have really been hot this year and we found this deal we thought you all would like to know about. M&A has really taken the spotlight these last few weeks. We had Zoom make a $15 billion dollar bet on the enterprise with its acquisition of Five9 and then earlier this week Square announced the acquisition of buy now pay later provider Afterpay for $29 billion dollars.
But I’m focused on a much smaller deal, that could potentially have even a greater impact on tech markets and one of my favorite types of stocks, a pick and shovel play; Investing in the companies that make everything run.
We’ve talked about Shopify powering eCommerce and companies like Roku powering steaming, but I’m going to take it back one step further to an industry that powers all of these megatrends, the data center. Without the tech that goes into the data center, the internet would come to a screeching halt.
The company I want to talk about today is Marvell and its acquisition of Innovium. Now, this acquisition may seem small at only $1.1 billion, especially compared to its acquisition of Inphi for $10 billion that just closed earlier this year, but I’m about to tell you why this is such a good move.
Marvell Technology at its core, is a semiconductor provider delivering the data infrastructure technology that connects the world. We are talking about the switches and storage controllers that help data move faster in the data center, and to you, the customer, and they sell billions of dollars of this equipment.
So, when I saw this acquisition, I got excited. Innovium may only be a startup in most people’s eyes, but looking at the business, they have established themselves as a strong cloud data center silicon provider.
Now again, $1 billion may not sound like a lot with today’s mega-mergers, but just remember Facebook only paid $1 billion for Instagram, and look at it now. It is one of the hottest social media applications on the planet.
Back to the acquisition, it could not have been better timing, with AMD and Nvidia both having major deals pending, it left Marvell the perfect opportunity to get in on a great company.
Right now, Marvell’s rival, Broadcom dominates the market for chips that go into the switches that help move digital information around inside massive data centers owned by cloud players like Amazon, Microsoft, and others.
Marvell made a big move last year with the purchase of Inphi, but Innovium is a strike right against their biggest rival.
Innovium offers some of the highest quality switches on the market and they have been able to garner over a 20 percent market share in the high-end 50G switch market. They are one of the only players that has been able to take market share away from Broadcom which has 76% of the market, leaving just 1% for everyone else.
Not only will Marvell now gain instant market share, but they will be able to integrate this tech into their current line of products and cross-sell to a new list of customers.
To top it off, Innovium management was formally at the top player in the market, Broadcom.
If you just look at all the semiconductor end markets and where the biggest growth is going to come from over the next five to 10 years, it’s just incredible, and data centers are going to be one of the biggest beneficiaries.
That’s why it’s a great time to get in on Marvell. This acquisition is all about accelerating their business in the data center, and in a time where the semiconductor supply chain is in the process of reinventing itself in the wake of the pandemic, Marvell is positioning itself to win.