The Information's TITV
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.
00:23:52 · Shane Burke, Akash Pasricha, Leo Schwartz
[00:23:52] S3: Hey Akash, thanks for having me. [00:23:54] S0: Leo, I want to start with you. Let's talk about the data center build out. Which senate races specifically are you watching tonight with respect to that? [00:24:06] S4: I'm gonna be a boring politics reporter and say, unfortunately, I don't think anything's really going to change that much based on tonight's results, especially in federal senate races. That being said, as you said, it has been a major theme in races. I think probably the most emblematic one of that has been in Ohio with John Husted and Sherrod Brown, a former senator, where Sherrod Brown has been accusing his opponent of being the face of data centers. Although at the same time, what you see in a lot of these races is that when it comes down to brass tacks, the views aren't actually that different. I think every candidate realizes that data centers and AI more broadly has been largely unpopular with voters and have taken sort of similar policy approaches to it. I mean, John Husted even was trying to advance rate payer protection legislation in the Senate. So even though it has been a big point of rhetoric, whether it will actually lead to different policy changes based on who gets elected is pretty unlikely, I think.
00:24:06 · Leo Schwartz, Akash Pasricha
[00:24:06] S4: I'm gonna be a boring politics reporter and say, unfortunately, I don't think anything's really going to change that much based on tonight's results, especially in federal senate races. That being said, as you said, it has been a major theme in races. I think probably the most emblematic one of that has been in Ohio with John Husted and Sherrod Brown, a former senator, where Sherrod Brown has been accusing his opponent of being the face of data centers. Although at the same time, what you see in a lot of these races is that when it comes down to brass tacks, the views aren't actually that different. I think every candidate realizes that data centers and AI more broadly has been largely unpopular with voters and have taken sort of similar policy approaches to it. I mean, John Husted even was trying to advance rate payer protection legislation in the Senate. So even though it has been a big point of rhetoric, whether it will actually lead to different policy changes based on who gets elected is pretty unlikely, I think. [00:25:07] S0: So the... Well, let's go to the governor races then, Shane. I mean, is this is kind of the ones that I think are more interesting. You did some great reporting on this and and some number crunching in a piece that we will link in the show notes. Which governor races specifically should we be paying attention to from your perspective?