Marvell announces $115 billion acquisition of optical device maker Lumentum

Marvell Technology Inc. today announced plans to acquire Lumentum Holdings Inc. for $115 billion, in one of the largest deals in tech history.

Lumentum investors are set to receive 4.5 Marvell shares for every unit of stock they own. That translates to about $1,132 per share, which is 23.9% higher than the company’s last unaffected stock price.

Marvell provides networking equipment for data centers and telecommunications infrastructure. Many of its products use fiber-optic cables to transmit data. Lumentum, in turn, makes components for fiber-optic network devices such as those offered by Marvell. The acquisition will give the latter company more control over its supply chain, which could enable it to more closely align upstream components’ design with its requirements.

Optical networks use laser emitters to generate the light which they transmit data. Lumentum sells a line of lasers based on indium phosphide, a semiconducting material that generates light more efficiently than silicon. The product family includes modular and continuous wave devices. Modulated lasers are used to physically connect servers to the host data center’s optical network, while continuous wave lasers power longer-range network links.

Lumentum also makes single-mode optical amplifiers. Such devices strengthen the laser signals that travel through long-haul carrier networks to reduce data transmission errors.

Last year, the company debuted a laser optimized for co-packaged optics, or CPO, chips. Such chips enable servers to connect to the host data center’s network without expensive modules called transceivers that are usually needed for the task. CPO technology has emerged as an important focus of Marvell’s growth strategy. Its chip design business can help customers integrate CPO modules into their custom artificial intelligence accelerators.

Lumentum doesn’t focus solely on the laser component market. It uses a material called indium gallium arsenide to make analog photodetectors, which customers can use to monitor their optical networks for errors. The company also sells optical circuit switches. Such devices use tiny mirrors to coordinate the flow of traffic, which removes the need to turn data into electrical signals and thereby saves power.

Notably, Lumentum will also give Marvell a presence in the industrial equipment market. The former company makes high-power lasers for cutting and welding machines. It’s unclear what will happen to that part of Lumentum’s product portfolio following the deal. After a large acquisition, companies sometimes spin off newly absorbed business units that don’t align with their core focus.

“By bringing together two leaders with highly complementary technologies, exceptional talent and specialized manufacturing capabilities, we intend to help shape the next era of AI connectivity and create exceptional stockholder value,” said Marvell Chief Executive Officer Matt Murphy.

The chipmaker expects to close the acquisition in the first half of 2028. The combined company will be led by Murphy, while Lumentum CEO Michael Hurlston will join the board along with two of the optical component supplier’s directors.

Marvell expects the deal to become accretive to its adjusted earnings per share within a year of closing. In the longer term, the company hopes to achieve annual run-rate cost savings of more than $1 billion and accelerate revenue growth. Marvell estimates that Lumentum will expand its total addressable market to $550 billion.

Photo: Lumentum