The price tag includes some liabilities and debt payments that Cavium will assume.
Xpliant is well known for being a rare chip startup working on Ethernet switches. That market has been dominated by Broadcom and therefore hasn’t been seen as a rich milieu for startups (although Barefoot Networks, which had the involvement of SDN guru Nick McKeown, is also in that space).
Who would fund such a company? Cavium, it turns out. An early investor, Cavium gave Xpliant $15 million in funding rounds up through June, the companies revealed today.
So, the net price tag on Xpliant is $75 million, which would consist of $40 million in cash and $35 million in Cavium stock, according to today’s announcement. The deal is due to close by the first quarter of next year, officials said on Cavium’s earnings call today.
Broadcom’s prowess in high-speed circuitry means any Ethernet switching contender would have to deliver more than just speed. Xpliant claims its advantage lies in intelligence and flexibility.
Cavium’s press release refers to the inability of current switch chips to deploy new features — and, in fact, equipment vendors recently experienced that lag, as it took some time for Broadcom’s Trident switch chips to add VXLAN tunneling, a popular network virtualization tool. Supposedly, Xpliant adds new levels of flexibility, although the company hasn’t explained how.
In the multicore processor market, Cavium is in competition with the likes of Intel (which has its own Ethernet switch from the Fulcrum Microsystems acquisition), Broadcom, and Freescale. The addition of an Ethernet switch would give Cavium more ways to line up against those companies’ arsenals.
Xpliant’s products are due to sample during the fourth quarter of this year, with production volumes coming in the second half of 2015, Cavium CEO Syed Ali said during the earnings call.
He added that there’s a system in development with one large customer that combines multiple Cavium offerings: Octeon III chips for computing, Xpliant chips for switching, and ThunderX chips (the company’s new processors based on the ARM architecture) for cloud-based tasks. (Note that neither Xpliant nor ThunderX chips are physically available yet.)
Xpliant was founded sometime around 2011 by former employees of Marvell — which had been a bigger force in Ethernet switch chips earlier in the 2000s. The startup has been quiet but visible, as it’s been participating in the Open Networking Foundation (ONF).
Cavium shares were down $2.30 (5%) at $45.50 in early after-hours trading.