Friday, September 3, 2010

Rumors: Cavium Received Proposal from Cisco - What does it Mean for DPI vendors?

Reported by Franklin Price, at benzinga site (August 31):

"Rumors circulating that Cavium Networks has received an unsolicited proposal from Cisco to acquire the company for $37.00 a share. Neither company could be reached for comment" (here).

Cavium (CAVM) closed at $25.21 on Thursday.

Cavium is a leading supplier of network processors for DPI (and other IP devices) equipment vendors. In Cisco hands, I wonder if they will continue to sell to other vendors - which are all Cisco's competitors. This will leave the market to its prime competitor, NetLogic/RMI.

"Cisco and the company’s manufacturing partners buy approximately 1% of all semiconductors produced globally, according to [Gary Mobley, an analyst at Benchmark report]. As a result, Cisco's chip vendors-such as Cavium and NetLogic-could be impacted. Cisco represented 25% of Cavium’s first-half 2010 revenue, up from 20% of 1H FY09 revenue. Cisco represented 29% Netlogic’s 1H FY10 revenue" (EETimes "Cisco's miss sends jitters in supply chain" - here).

See "DPI Announcements - Cavium Networks OCTEON II CN68XX" - here.

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