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Who wants to buy Marvell's mobile business?

Posted: 07 Aug 2015 ?? ?Print Version ?Bookmark and Share

Keywords:smartphone? chip vendor? mobile? acquisition?

Major chip vendors Renesas Mobile, Broadcom, ST-Ericsson and Nvidia had already left the global market, but this did not help the remaining players Qualcomm, MediaTek and Samsung from facing stiff price competition. Add to this the grim prospect of weaker demand for smartphones.

With the outlook of a shrinking market, Qualcomm last month announced that it would lay off 15 per cent of its employeesabout 4,700 people. MediaTek last week pared its expectations for 2015 as a result of weaker demand for smartphones and stronger price competition for handset chips.

Against that backdrop, Marvell Technology is back in the rumour mill.

The Santa Clara, Calif.-based company has been reportedly toying with the idea of selling control of its mobile chip business. The latest speculation, as reported by Bloomberg, is that Marvell has attracted interest from Chinese state firms including Leadcore Technology Co. and Shanghai Pudong Science & Technology Investment Co. (PDSTI).

According to the report, the two companies are weighing offers for Marvell's mobile unit. Marvell reportedly values it at about $1 billion. "One option under consideration would see Marvell pool its wireless operations into a joint venture, with a Chinese buyer taking a majority stake," according to Bloomberg.

The grapevine is ripe with merger/acquisition/JV scenarios for Marvell's mobile unit. They range from a sale to a Chinese smartphone company to a joint venture that might involve Xiaomi. One popular rumoura potential sale to Lenovowas publicly denied by Lenovo's CEO.

Marvell CEO

Sutardja: We are not backing off from this business.

Meanwhile, Marvell CEO Sehat Sutardja, pressed by financial analysts about his willingness to explore potential strategic alternatives for the Mobile business unit, stated during the earnings call in February, "Anything that will bring the share value of a shareholder up is our responsibility to entertain and manage and look at all the different possibilities." However, he added, "But for sure we are not backing off from this business."

Regardless of how the deal is structured, Marvell's search for suitors illustrates a dramatic change in the global smartphone business. Nobody seems winning big (except Apple). Even for a chip vendor with good, solid technology, it's increasingly tougher to get fair value. Even more difficult is finding a buyer who not only appreciates your team, but has the ability to make the most of what you've already developed.

The irony is that the longer Marvell hangs onto its mobile division, which the company's CEO said he isn't dumping, the narrower the window appears to get.

Will Strauss, president of Forward Concepts, wonders if Leadcore, whose modems are now shipping in high volume in selected Xiaomi smartphones, would even need Marvell. "Other than perhaps for its many patents and skilled engineers in Shanghai," he said.

Meanwhile, other Chinese fabless chip companies have already tied the knot with Marvell's competitors. "Rockchip is tied in with Intel's LTE modems, and Allwinner is tied in with Qualcomm's," said Strauss. "So that narrows the possibilities in China" for Marvell.

Chinese chatter

The industry chatter in China over Marvell's mobile business remained quiet for a while, but it picked up after the Bloomberg report, according to industry sources in China.

While nobody is confirming anything officially, one Chinese mobile industry observer said the latest rumour is that "Datang, PDSTI and Marvell have signed an exclusive negotiation agreement," under which they may establish a joint venture, and Marvell will keep some stock in the new venture.


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