Marvell is acquiring optical components maker Lumentum in a massive $115 billion deal

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

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

Marvell provides network equipment for data centers and telecommunications infrastructure. Many of its products use fiber optic cables to transmit data. Lumentum, in turn, produces 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 allow it to better align the design of upstream components with its needs.

Optical networks use laser emitters to produce the light they use to transmit data. Lumentum sells a line of lasers based on indium phosphide, a semiconducting material that produces 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 connections.

Lumentum also makes single-mode optical amplifiers. Such devices amplify the laser signals transmitted over long-distance carrier networks to reduce data transmission errors.

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

Lumentum doesn’t just focus on the laser components market. It uses a material called indium gallium arsenide to make analog photodetectors that allow customers to monitor their optical networks for errors. The company also sells optical circuit switches. Such devices use tiny mirrors to coordinate traffic flow, eliminating the need to convert data into electrical signals and thereby saving electricity.

Notably, Lumentum will also provide Marvell with a presence in the industrial equipment market. The former company produces high-performance lasers for cutting and welding machines. It is unclear what will happen to this part of Lumentum’s product portfolio after the deal. After a large acquisition, companies sometimes spin off newly acquired business units that don’t fit with their core business.

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

The chipmaker expects to complete 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 directors of the optical components supplier.

Marvell expects the transaction to be accretive to adjusted earnings per share within one year of closing. Longer term, the company hopes to achieve annual 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