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The chip designer has been working with EZchip (Nasdaq: EZCH ) for years to develop and market high-speed networking processors. Indeed, the two companies just announced their intentions to produce a next-generation solution that's twice as fast as the current state of the art. The dynamic duo is particularly cozy with networking giant Cisco Systems (Nasdaq: CSCO ) , and EZchip expects the EZchip-Cisco-Marvell partnership to drive sales growth for years to come.
But that wasn't Marvell's biggest networking news on Wednesday. Instead, the company said that it has acquired Swedish high-speed networker Xelerated for an undisclosed sum.
Xelerated is one of only two chief competitors in EZchip's books, the other one being Broadcom (Nasdaq: BRCM ) through its acquisition of Sandburst six years ago.
This acquisition expands Marvell's networking portfolio considerably -- and makes EZchip investors nervous. Marvell promises to continue working with EZchip on the current and just-announced networking chips and "is committed to the long term relationship with EZchip."
The Xelerated deal actually closed last week -- perhaps the disclosure was delayed to line up with the calming next-generation-chip announcement. If so, the tactic didn't work all that well -- EZchip shares fell as much as 3.3% on a pretty flat market day. Marvell itself hardly moved on the news, but Broadcom went down by nearly a full percent.
With Xelerated and EZchip both depending on Marvell, Broadcom is now the only other horse in a two-pony race. This comes just as super-fast network backbones are becoming more important than ever -- mobile computing and digital video are just two of the many bandwidth-hungry drivers of dramatic growth in this space.
Marvell is making a smart move here. You'd be equally smart to follow this storyline with a keen eye, because there's real money to be made here. The Fool is here to help: add Marvell, Broadcom, and EZchip to your Foolish watchlist in a single click.