Cavium buys QLogic in $1.36 billion data center processor deal

The two companies aim to scale better and target large customers such as HPE, Dell, Cisco, IBM and others.

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Cavium, which makes processors for enterprise data centers, said it will buy QLogic, a provider of networking infrastructure, in a deal valued at about $1.36 billion.

The purchaseallows the combined companies to better target data center OEMs and offer a more complete stack.

As for the financials, Cavium will buy QLogic for $15 a share. Of that tally, $11 a share will be cash and the rest will be 0.098 of Cavium shares.

In a statement, Cavium noted that QLogic's connectivity and storage hardware will complement its networking, compute and security gear. The portfolio is designed to better target enterprise, cloud, storage and telco markets. The combined company also said its customer base will be more diversified.

The combined company will count HPE, Dell, Lenovo, Pure Storage, IBM, Oracle, EMC and NetApp as customers. The two companies have less than 10 percent revenue overlap in the customer base.

Cavium said that QLogic will add about 60 cents to 70 cents a share to its 2017 non-GAAP earnings. Cavium also said that it will be able to scale better with nearly $1 billion in revenue. Cost savings will come from consolidating sales, IT, research and development and manufacturing efficiencies.

The acquisition is expected to close in the third quarter.

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