San Jose, Calif. – Cavium, Inc., (NASDAQ: CAVM), a leading provider of semiconductor products that enable intelligent processing for enterprise, data center, cloud, service provider wired and wireless networking, today announced a definitive agreement to acquire Xpliant, Inc., a privately held company headquartered in San Jose, California. Xpliant is a provider of high performance, high density switch silicon targeting a broad range of switching applications for the data center, cloud, service provider and enterprise markets.
The total acquisition cost is projected to be approximately $90 million, which includes payments to stockholders, note holders and other liabilities and costs. Cavium was an investor in Xpliant having provided $15 million of funding to Xpliant through June 2014, which is included in that total cost estimate. The remaining $75 million will be comprised of approximately $40 million in cash and $35 million in stock.
Xpliant technology and products address the need for increased capacity in both networking infrastructure and data centers driven by the steep growth of mobile applications and social networking. Global mobile data traffic will increase nearly 11-fold between 2013 and 2018 growing at a CAGR of 61%, while cloud data center IP traffic will more than double between 2014 and 2017 growing at a CAGR of 30% according to Cisco’s Visual Networking Index and Global Cloud Index.
This expected growth will require increased intelligence and bandwidth within the network switching solution offerings to deliver enormous amounts of data in an efficient manner while controlling power consumption and costs. Furthermore, software-defined networking (SDN) continues to emerge as the architectural implementation of choice for building these networks.
Ethernet Switches are used to connect components within a system as well to connect various systems such as servers, server racks and networking appliances in the data center, enterprises and service provider networks. Switches are also used to connect servers, wireless access points, desktops and various network appliances throughout an enterprise. The Total Addressable Market for Ethernet switch silicon is currently valued in excess of $1B per year. The continued rise of SDN is expected to accelerate a refresh cycle further accelerating the deployment of new switch platforms.
Current switch solutions are built on a legacy fixed function architecture that will not be able to address the new market trends and requirements in data center, service provider and enterprise segments. Current networking silicon is hardwired to only offer a limited set of fixed function capabilities. Any new features that need to be added require a new revision to the silicon which can significantly delay deployments. Furthermore, these fixed function capabilities do not currently enable the software flexibility required to deploy true software defined networking resulting in extremely inefficient networks. Another disadvantage of the current legacy fixed function architecture is that system vendors cannot differentiate and optimize their product features and capabilities for a range of target market applications.
Xpliant is a semiconductor provider that has assembled a world class team of switching industry veterans who have previously delivered several generations of industry leading switching solutions to market at a range of leading switching system and silicon vendors. Xpliant has developed a family of switching silicon solutions with world class10G/40G/100G port speeds and port densities supporting throughput ranging from multi-hundred gigabit to multi-terabit. In addition, the products have been designed from the ground up to specifically address the challenges of throughput and flexibility driven by the needs of next generation networking infrastructure and software defined networking.
Xpliant’s innovations in switching architecture will enable increased intelligence and flexibility beyond what is available today in commodity Ethernet switch silicon while delivering market leading bandwidth, throughput and scalability along with unprecedented flexibility and programmability. All of these characteristics are required to efficiently enable virtualized data center and software defined networking without compromise. Xpliant’s flexible and programmable architectural solutions are designed to enable OEM customers to bring to market customized and highly differentiated products optimized for their target markets.
Cavium has a rich history of identifying emerging market trends and delivering disruptive industry leading products to the wired and wireless infrastructure market. The addition of Xpliant’s family of switching solutions, which are critical building components for next generation infrastructure, will be highly synergistic with Cavium’s existing infrastructure product offerings such as ThunderX, OCTEON and LiquidIO families. This family of switching solutions will enable Cavium to significantly increase its share of BOM in the data center, service provider and enterprise markets. Additionally, these products will allow Cavium to offer complete end to end solutions for compute, networking and storage, optimized for best performance, cost and power for next generation virtualized software defined infrastructure.
As the world migrates from a traditional IT client server model to what IDC refers to as the 3rd platform, which is driven by social and mobile technologies, Cavium is empowering this market transition with a full range of processors, adaptors and, with the acquisition of Xpliant, Ethernet switches that will redefine the heart of the network infrastructure.
“Xpliant has developed a disruptive family of switching silicon solutions for next generation software defined networks,” said Syed Ali, President and CEO, Cavium. “This product line significantly expands our addressable TAM and will be an exciting addition to our portfolio of solutions for the data center, service provider and enterprise markets. The Xpliant line of products is highly synergistic with Cavium’s existing infrastructure products and will enable Cavium to deliver highly optimized end to end solutions to our customers. We are extremely pleased with the strong customer engagements and traction which are an excellent validation of Xpliant’s technology and products”.