Marvell Technology Group Ltd., Sunnyvale, Calif., has agreed to purchase Galileo Technology Ltd., a switching and routing chipmaker, in a stock swap originally valued at $2.7 billion when the deal was announced earlier in the week. The purchase, however, raised eyebrows because both companies have combined annual sales of $204 million and net income of about $41 million.
At Tuesday's close, Marvell's share prices plummeted 32%, which reduced the purchase price to $1.8 billion.
But according to Marvell's president and chief executive, Sehat Sutardja, Galileo will add critical technologies to its networking offering. "[The merger] combines physical layer communications silicon with [Marvell's] higher-layer packet processing and switching silicon for next generation systems that are capable of supporting gigabit and faster data rates,'' said Sutardja.
Galileo, Manof, Israel, offers routing, switching, and systems management devices for LAN, MAN, and WAN networks. IBM's Microelectronics Division recently licensed its PowerNP processor to Galileo for switching, routing and other Galileo networking controllers. Marvell offers broadband mixed-signal and DSP physical-layer interfaces for high-speed networking applications.
Upon completion of the merger, Avigdor Willenz, executive vice president and general manger of Galileo, will join Marvell and report directly to Sutardja. He will also join Marvell's board of directors. Manuel Alba, Galileo's president will also join Marvell's board. Galileo will continue operations in both Israel and San Jose, Calif.