How Will Tanzanite Buyout Bolster Marvell’s Cloud Capabilities?

Semiconductor developer and producer Marvell Technology, Inc. (NASDAQ: MRVL) recently revealed that it has agreed to acquire advanced Compute Express Link (CXL) developer Tanzanite Silicon Solutions. The financial terms of the all-cash deal, which is likely to close in the second quarter, have been kept under wraps.

Following the news, shares of the company did not react kindly and fell almost 7% during the normal trading hours on Monday. The stock, however, pared its losses slightly to close at $54.10 in the extended trading session.

Strategic Impact

With the adoption of cloud infrastructure and services becoming more and more critical by the day, existing servers are riddled with numerous scaling challenges that hamper efficiency. In such a scenario, silicon components based on CXL can facilitate new cloud data center architectures with significant performance and efficiency benefits.

With this impending acquisition, Marvell will gain access to Tanzanite’s expertise in CXL technology, which will aid Marvell’s goal of building a complete composable cloud infrastructure.

Management Commentary

The Executive Vice-President of Storage Products Group at Marvell, Dan Christman, said, “We believe that CXL will be a significant game-changer in enabling optimal resource utilization in next generation data centers, and the acquisition of Tanzanite advances our abilities to address our customers’ most challenging issues. Marvell’s investment underscores our commitment to deliver on the promise of CXL across our industry-leading cloud portfolio spanning compute, electro-optics, networking, security and storage.”

Stock Rating

Recently, Raymond James analyst Chris Caso upgraded the stock to Buy with a price target of $80, which implies upside potential of 48.9% from current levels.

Consensus among analysts is a Strong Buy based on 13 Buys and three Holds. MRVL’s average price target of $91.20 implies upside potential of 69.7% from current levels. Shares have gained 21.2% over the past year.

Conclusion

By adding Tanzanite’s capabilities in the CXL domain, Marvell’s cloud offerings are expected to receive a shot in the arm.

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