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After NVIDIA and AMD, Marvell Technology Goes Shopping With $10 Billion Inphi Takeover

By Nicholas Rossolillo – Oct 30, 2020 at 5:00PM

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The data center race is heating up.

Earlier this year, NVIDIA (NVDA 5.14%) announced its intent to purchase chip designer ARM Holdings for $40 billion, and more recently AMD (AMD 2.67%) reached an agreement to merge with Xilinx (XLNX) for $35 billion. 

Not to be left out of the feeding frenzy is Marvell Technology Group (MRVL 3.89%), which announced on Thursday it inked a deal to acquire data center and 5G mobile-network hardware provider Inphi (IPHI) for $10 billion.

An illustrated cloud surrounded by computers.

Image source: Getty Images.

Merger and acquisition activity in the semiconductor industry has accelerated in 2020, and it all has to do with cloud computing and data centers. Back in the spring, NVIDIA discussed its vision of the data center as a primary computing unit, and acquiring ARM would double down on the company's sweeping moves in this area. Likewise, AMD has similar aspirations in data centers and other modern computing needs. Marvell, which is far smaller than NVIDIA and AMD, is eyeing a similar goal. 

Marvell specializes in chips involving the movement of big blocks of data, and Inphi is complementary to its portfolio with devices that help move data faster -- for internet infrastructure, and between and within data centers themselves. More than 70% of Inphi's sales come from cloud computing operators and 5G networks, which pairs well with Marvell's storage, networking, and computing hardware.

Marvell has predicted its total serviceable market is worth $16 billion this year and will expand by 9% a year through 2023. Adding Inphi to the mix bumps Marvell's predicted annual serviceable market growth up to 12%, and by 2023 it thinks there will be some $23 billion in annual sales for its wares. Given that the combined companies have generated just $3.63 billion in the last 12 months, there is plenty of room for growth. In addition to the ability to cross-sell products between customers, Marvell plus Inphi is expected to be a far more profitable company with operating margins of 38% to 40% targeted over the long term (compared to just 22% for Marvell over the last 12 months).

Chipmakers are trying to round out their product portfolios, not just to boost sales, but also to make a "the more you buy, the more you save" value proposition to cloud computing and data center customers. Lest it be left behind, this is a good move by Marvell after rivals NVIDIA and AMD made their respective plays.

Nicholas Rossolillo owns shares of Marvell Technology Group, NVIDIA, and Xilinx. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool recommends Inphi and Xilinx. The Motley Fool has a disclosure policy.

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