Marvell Falls More Than 8% After Hours on Reports of Potential All-Stock Lumentum Deal
Key Facts
Marvell shares fell more than 8% in extended trading on October 28, while Lumentum rose about 11%, after Bloomberg reported advanced talks between the companies over a potential acquisition. Reuters said the expected deal would be entirely in stock, but its precise terms were unknown. Neither company confirmed reaching an agreement, and both did not immediately respond to Reuters requests for comment. The report came after the regular market close, so that day's closing prices for the two stocks do not reflect the subsequent move. Marvell closed at $251.65, up from $243.57 in the previous session, while Lumentum closed at $913.95, compared with $866.18 on October 27.
The extended-hours move marked a clear divergence between the two stocks after news of the talks emerged: the prospect of issuing new shares weighed on the buyer's stock, while the target company's shares rose. If the deal is completed entirely in stock, the ownership stake of current Marvell shareholders could decline as the number of shares increases, but that remains a potential effect, not an established outcome. The available information did not disclose final terms, an exchange ratio or the deal's value. Nor do after-hours moves prove that the financing structure alone drove Marvell's decline, as market coverage did not focus solely on that factor. Attention is on the details of the consideration and how the two companies' businesses would be combined if the talks lead to an agreement.
The significance of the talks goes beyond adding a company to Marvell's portfolio, as Lumentum produces optical components used in communications networks and data centers. Reuters said AI workloads are increasing demand for faster data transmission, putting these components in investors' focus. A potential deal would expand Marvell's optical interconnect technologies serving AI infrastructure, alongside its chip and networking businesses. The news agency described Marvell as one of the leading beneficiaries of the AI spending boom, with demand rising for its custom chips and networking products. This backdrop offers a strategic rationale for the talks, while the deal's success would depend on its terms and the companies' ability to integrate.
Marvell's latest results show demand broadening across its data center-related businesses. In its quarterly report published in August, the company said second-quarter fiscal 2027 revenue was $2.7 billion, up 37% from the corresponding period of the previous fiscal year. It attributed the increase to 46% growth in data center sales during the quarter ended August 1, 2026. In October, Marvell raised its fiscal 2028 revenue forecast to $20 billion from $15 billion, citing strong demand for custom AI chips and networking products used in data centers. That growth places the potential deal within the company's efforts to expand its position in the AI infrastructure market.
The deal also raises questions about financing and integration given its potential size. Reuters said Marvell had about $3.92 billion in cash and cash equivalents in the latest fiscal quarter available at the time of the report. Bernstein analysts said financing an acquisition of this size entirely in cash would likely be impossible, consistent with Bloomberg's report of an expected stock-based structure. Such a structure would reduce reliance on available cash, but could dilute current shareholders' ownership if Marvell issues new shares. The deal's value and detailed terms are not yet known, making it too early to estimate its ultimate financial impact.
The talks also follow Marvell's earlier moves in photonics and optical connectivity; Reuters noted the company's acquisition of Celestial AI in a deal valued at $3.25 billion that was announced late the previous year. The news agency described that move as part of Marvell's expansion into photonics and optical interconnect technologies for AI infrastructure. Reuters Breakingviews said a potential deal with Lumentum has a strategic rationale for strengthening Marvell's ability to compete with Broadcom. But it cautioned that AI-driven supply constraints have lifted the target's value, potentially making price a sensitive factor in any agreement. The balance between strategic gains and acquisition costs remains central to assessing the potential deal.
A person familiar with the matter told Reuters that an announcement of a potential agreement could come as soon as the following week, but that was not confirmation of a final agreement. The talks remained private at the time of the report, and neither company provided immediate comment. Attention will turn to whether the negotiations produce a public agreement and to the details of the stock consideration, if confirmed, as well as the financing and integration terms. Until the companies announce a deal, it remains a possibility under negotiation. The distinction between the regular-session close and extended trading remains essential to understanding the stocks' moves on October 28.