The Information's TITV
00:18:16 · Akash Pasricha, Tore Svanberg
[00:18:16] S0: What do you think Lumentum shareholders are reacting to here? Because, I mean, look, typically a deal gets announced, the target, right? I mean, those investors get excited and the acquirer, those shareholders get nervous. Here, it was both of them getting nervous. So Lumentum's anxiety is what exactly? [00:18:37] S2: Yeah. I mean, I think this has more to do with the length of when this deal is going to close, right? So it's not going to close until first of the twenty eighth. There is going to be some regulatory scrutiny. So I think what Lumentum investors are worried about is, could this guild actually go through? Will it get approved? And given the timeframe, how long this is going to last, could that cause some disruption to their business model? Could competitors come in? Could customers get nervous? So I think that's what Lumentum investors are basically worried about. Do you think it'll go through? I personally think it will go through. There's no regulatory reasons why this wouldn't go through. Certainly if you just use the laws out there and the legality, there's no reasons why this should cause any antitrust anxiety. But keep in mind, this is going to need both China and US approval. As you know, politically, there's been some concerns there. But again, just purely from an antitrust perspective, I think the deal is going to go through.
00:18:37 · Tore Svanberg, Akash Pasricha
[00:18:37] S2: Yeah. I mean, I think this has more to do with the length of when this deal is going to close, right? So it's not going to close until first of the twenty eighth. There is going to be some regulatory scrutiny. So I think what Lumentum investors are worried about is, could this guild actually go through? Will it get approved? And given the timeframe, how long this is going to last, could that cause some disruption to their business model? Could competitors come in? Could customers get nervous? So I think that's what Lumentum investors are basically worried about. Do you think it'll go through? I personally think it will go through. There's no regulatory reasons why this wouldn't go through. Certainly if you just use the laws out there and the legality, there's no reasons why this should cause any antitrust anxiety. But keep in mind, this is going to need both China and US approval. As you know, politically, there's been some concerns there. But again, just purely from an antitrust perspective, I think the deal is going to go through. [00:19:44] S0: And as you think about this from a competitive perspective, so Marvell, obviously Broadcom is another big networking chip competitor for it. Does it help compete against that company? And we're going to talk as well about something you called out in your note, which is the competition that its customers might see it waging against it with this deal.
00:19:44 · Akash Pasricha, Tore Svanberg
[00:19:44] S0: And as you think about this from a competitive perspective, so Marvell, obviously Broadcom is another big networking chip competitor for it. Does it help compete against that company? And we're going to talk as well about something you called out in your note, which is the competition that its customers might see it waging against it with this deal. [00:20:06] S2: Yeah. So again, if you think about what I just mentioned before, this convergence between semiconductor technology and optical technology, there's very few companies that have all of that in house under one umbrella. Broadcom does. So they certainly had the same vision, the same view, and now Marvell obviously is going to be the second one. I think the alternative is still to buy discrete components from either side, but I think that's also one of the reasons why Lumentum decided to sell because they themselves, I think, were also looking at potentially bringing semiconductor technology into their house. That would have required obviously buying a lot of different smaller companies. I think that in itself would probably be a very long and tiring process. But the reality is that, yeah, now you only have two big players here that have the capabilities both in house. [00:20:58] S0: Okay. And what about the point you called out in your note here, the customer perspective on this? Marvell, I guess some of their customers compete with them on this stuff?
00:20:58 · Akash Pasricha, Tore Svanberg
[00:20:58] S0: Okay. And what about the point you called out in your note here, the customer perspective on this? Marvell, I guess some of their customers compete with them on this stuff? [00:21:09] S2: Yeah. So the one thing that we pointed out as potentially being a risk to this transaction is that basically Marvell is buying one small customer that does optical transceivers. And does that basically mean Lumentum's competitors who also buy from Marvell, would they get cold feet and look for alternative sources? Our understanding is that with this combination, the transceiver business would be less than 10% of revenue. While we thought that would be a bigger risk initially, when you put it into numbers and it's less than 10%, it does become less of a risk. But that's certainly something to keep an eye out here as this merger plays out. [00:21:56] S0: Okay. Last question for you. What do you think of the price that they paid? I know that depending on which share price you take, at what point in the story, you either get closer to $115,000,000,000 or closer to $80,000,000,000 You called this out as well last night. So whatever it is, what do you think of the valuation broadly, the per share price that they've put on it?
00:21:56 · Akash Pasricha, Tore Svanberg
[00:21:56] S0: Okay. Last question for you. What do you think of the price that they paid? I know that depending on which share price you take, at what point in the story, you either get closer to $115,000,000,000 or closer to $80,000,000,000 You called this out as well last night. So whatever it is, what do you think of the valuation broadly, the per share price that they've put on it? [00:22:19] S2: Yeah. Mean, this is an all stock deal. So at the end of the day, these two stocks are now tied at the hip, right? So whatever Marvell stock does, Lumentum will follow. And I think that explains why both stocks were down yesterday because they are now officially tied at the hip. That obviously also then dictates eventually what the enterprise value is going to be when the deal actually closes. We'll just have to wait and see. But I think when it comes to these deals, especially this size, I think investors do worry about the dilution because Marvell is offering quite a bit of shares here, but I get it. But I think given the strategic rationale to this acquisition, I also think that this deal makes a lot of sense. And by the way, the CEO, Marvell, Matt Murphy, he has a track record of doing some really, really good deals and delivering a lot of value over time. And I think with this one, I think we'll see tremendous amount of value being created.
00:22:19 · Tore Svanberg, Akash Pasricha, Shane Burke
[00:22:19] S2: Yeah. Mean, this is an all stock deal. So at the end of the day, these two stocks are now tied at the hip, right? So whatever Marvell stock does, Lumentum will follow. And I think that explains why both stocks were down yesterday because they are now officially tied at the hip. That obviously also then dictates eventually what the enterprise value is going to be when the deal actually closes. We'll just have to wait and see. But I think when it comes to these deals, especially this size, I think investors do worry about the dilution because Marvell is offering quite a bit of shares here, but I get it. But I think given the strategic rationale to this acquisition, I also think that this deal makes a lot of sense. And by the way, the CEO, Marvell, Matt Murphy, he has a track record of doing some really, really good deals and delivering a lot of value over time. And I think with this one, I think we'll see tremendous amount of value being created. [00:23:17] S0: Great. Well, Tore, I want to thank you for coming on. That is Tore Svanberg from Stifel here on TITV. It is election day, and between AI data centers and the California billionaire tax ballots, the tech sector has been one of the newsiest parts of this election cycle. Joining us now to break down what to watch tonight are tech and politics reporter, Schwartz, and senior data journalist, Burke, is tracking key governor races and their implications for data center development. Welcome to you, both of you. It is great to have you here. [00:23:52] S3: Hey Akash, thanks for having me.