🚨Why did $LITE agree to sell to $MRVL? TL;DR • I think Lumentum saw two things… · @damnang2 · TwKit

@damnang2

🚨Why did $LITE agree to sell to $MRVL? TL;DR • I think Lumentum saw two things coming. The laser market could tip into oversupply in 2029, and CPO could become the dominant architecture for optical links in AI systems. • The offer may look low against $LITE’s record high. But Lumentum negotiated when lasers were hardest to source and its valuation was near its peak. • I doubt SAMR will approve the deal within a year. I also think closing is more likely to slip beyond the companies’ target of the first half of 2028. • A prolonged review could steer customers looking for a second source toward $COHR, $AAOI and Chinese laser suppliers. A little over two years ago, Lumentum was losing money. Its adjusted operating margin has since reached 42.3%, and I think the laser shortage, which looks set to last into 2029, explains much of that improvement. In my view, the biggest reason the board agreed to sell was the risk of finding itself back in a highly cyclical components business once supply caught up with demand. I would hardly call Lumentum’s current valuation cheap. If the deal closes, Lumentum would become the optics arm of a company that can offer DSPs, switches, custom XPUs and optical engines together. That would let Lumentum compete for business earlier, while customers are still deciding how to connect the accelerators in their next AI systems. If a wave of new laser capacity comes online in 2029 and 2030, Lumentum would have Marvell’s scale behind it and could potentially benefit from its ties to NVIDIA as well. That is how I read Marvell CEO Matt Murphy’s comment on CNBC that the deal would put Marvell in a better position to support NVIDIA. China is where my timeline differs from management’s. The political backdrop has grown more difficult. A bill before the US Senate would restrict federal agencies’ use of InnoLight and Eoptolink transceivers in critical systems. This deal would bring together suppliers of key components used by those two module makers, giving SAMR leverage to negotiate terms. Marvell and Lumentum expect to close in the first half of 2028. I think it will take longer. While the review plays out, I expect module makers to qualify more suppliers. I think $COHR is best positioned to pick up those orders. It is the largest independent optics supplier making everything from lasers to finished modules. $AAOI could benefit as well, but the question is whether it can bring enough capacity online in time. $CIEN has been a major Lumentum customer and competes with Marvell in coherent DSPs. I would expect Ciena to feel more pressure to diversify its laser supply. Smaller laser suppliers such as Sivers and MACOM could also draw interest from customers looking for a second source, though I would expect meaningful additional volume from this deal in 2028 or later. My take is that CPO is the natural next step for the optics industry. If both companies see that shift coming, I can understand why these terms made sense to them. NFA / DYOR

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