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Semiconductor vendor to acquire MontaVista
2009-11-10 Article Rating:  / 3
Semiconductor firm Cavium Networks announced it has signed a definitive agreement to acquire embedded Linux pioneer MontaVista Software for $50 million. After the acquisition wraps up in December, MontaVista will run as a separate operating unit, retain its own brand name, and support multiple architectures, MontaVista execs Jim Ready and Dan Cauchy told LinuxDevices.
The $50 million deal is comprised of approximately $16 million in cash and $34 million in Cavium Networks common stock, says Cavium, a U.S.-based semiconductor firm that focuses on high-end carrier-grade networking processors. The acquisition of the privately held MontaVista is expected to "significantly increase Cavium's software and services revenue, and is expected to be gross margin and non-GAAP earnings accretive in 2010 and beyond," says the company. MontaVista's chief rival in commercial embedded Linux operating systems (OSes) and tools, publicly held Wind River, was acquired this summer for $884 million. Wind River, which was recently projected by VDC Research to have moved past market leader MontaVista in revenues, with over 30 percent of embedded Linux revenues, still earns most of its revenues from its VxWorks RTOS. Cavium: No change for multiple architecture supportAfter the acquisition, MontaVista Software will run as a separate operating unit and will retain the MontaVista brand name, says Cavium. In addition, says Cavium, it will continue the MontaVista business model and support embedded Linux on multiple architectures from multiple processor vendors. MontaVista will maintain its own dedicated and focused engineering, as well as sales and product management staff, says Cavium. Its customers and partners "will see no change in customer facing field operations and the web-based support and product download sites will be maintained," says the company. In proclaiming MontaVista's independence, Cavium is echoing Intel's and Wind River's repeated claims that they are maintaining business as usual without favoring the acquiring company's semiconductor platforms. So far, Intel and Wind River seem to have lived up to their word on that score. 
In a brief interview with LinuxDevices following the acquisition announcement, VP of marketing Dan Cauchy (right) and MontaVista founder and CTO Jim Ready both amplified the message that customers have nothing to fear from undue Cavium influence. "MontaVista will run as a separate operating company, with its own headquarters and branding, and we will be committed to all hardware platforms," said Cauchy. "We will continue our partnerships with third-party semiconductor firms including Freescale, Intel, Texas Instruments, and others, and continue to support Linux and open source." "We MontaVista's president will report to Cavium's CEO, says Cavium. When asked whether current MontaVista CEO Rusty Harris would fill that role, a MontaVista spokesperson would only say that "Rusty is present and accounted for." Cavium is known principally for its MIPS64-based Octeon, Octeon Plus, and new Octeon II system-on-chips (SoCs), which primarily target networking and wireless infrastructure applications, as well as storage and industrial applications. The Octeon platforms are supported both by MontaVista's latest MontaVista Linux 6 (MVL6), as well as by Wind River Linux 3.0 for MIPS. More recently, Cavium announced an "Econa CNS3xxx" SoC family with single- and dual ARM11 cores clocked at up to 700MHz. The Econa chips, offer over ten multimedia and networking acceleration engines, a Linux SDK, and claimed power consumption of under a Watt. Of particular interest to Cavium is MontaVista's Carrier Grade Linux (CGL) distribution, MontaVista MontaVista Linux Carrier Grade Edition (CGE). The distribution was recently upgraded to version 5.1, adding support for 4G wireless networks, including LTE and WiMAX, as well as integrating OpenSAF High Availability (HA) capabilities and virtual routing and forwarding functionality, says MontaVista. MontaVista CGE is still the only CGL distribution to be compliant with CGL 4.0, IPv6, and Linux Standards Base (LSB) 3.0 certifications, claims MontaVista. A pioneer in the embedded Linux business, MontaVista recently celebrated its tenth anniversary of selling Linux tools and distributions. Founded by Ready, MontaVista stood alone for many years as the dominant embedded Linux leader with its MontaVista Hard Hat Linux commercial distribution and subsequent MontaVista Linux releases. Then Wind River expanded into embedded Linux from its base with the VxWorks, and a lively rivalry has held sway for many years. Cauchy and Ready comment on acquisition When asked whether the Cavium acquisition would mean an increasing focus on its carrier-grade CGE distribution over the general MVL6 product, Cauchy answered no, noting that Cavium also offers other chips, such as video networking processors, and low power ARM-based chips like Econa, which MontaVista plans to support. Cauchy, who heads up the Linux Foundation's CGL working group, added, however, that "Carrier Grade Linux continues to be one of our top revenue generators, and now we will be able provide more tightly coupled integration with Cavium chips." According to Ready, it makes sense for semiconductor companies to want better integration with software tools and distributions, even if that means acquiring the company. "From the Cavium perspective, there's this classic semiconductor conundrum, sort of the asparagus-growing phenomenon, where it takes three years to develop a new processor with supporting software, so by having this strong software component, it's a very good business model for them." Cavium's press release and conference call provided ample reasons for why the networking semiconductor firm wanted to acquire MontaVista, but why was MontaVista attracted to Cavium? "Cavium and MontaVista have similar customers, including Cisco, Alcatel-Lucent, and NEC, and we both see this as a way to build a profitable software and services business around this commonality," said Cauchy. Cauchy added, "As a public company, Cavium also provides us with financial stability, and the opportunity to invest more in roadmaps and product features in areas such as virtualization and multi-core tools. It will help us to grow in those areas faster than we could have as an independent company." When we asked whether MontaVista accepted the acquisition deal in part as a necessary response to Intel's acquisition of Wind River, Cauchy seemed to agree. "There are obvious parallels with the Wind River acquisition, and then Mentor Graphics' acquisition of Embedded Alley only further indicated that Linux was a growth area." Cavium lists some of MontaVista's major customers as:
Stated John Bourgoin, President and CEO of MIPS Technologies, "MontaVista and MIPS have been close partners since 2001. The combination of Cavium Networks and MontaVista is extremely promising for the continued availability of commercial and carrier grade Linux on the industry leading MIPS-based processors." Stated Syed Ali, President and CEO, Cavium Networks, "Software is becoming an increasingly important part of the total solution with the rapidly increasing adoption of multi-core processors. This acquisition will complement Cavium's market leading processor portfolio with world-class software expertise and will enable us to deliver highly compelling and differentiated solutions to the market." Stated Rusty Harris, President and CEO, MontaVista Software, "Embedded Linux is poised for rapid growth. By becoming part of Cavium Networks, MontaVista can confidently continue to offer industry leading commercial grade embedded Linux, support and services to our customers and partners." Related Stories:
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're excited about it," said Ready (left). Fresh from the conference call with Cavium, he added, "It's a pleasure to hear your own company described in such glowing terms. Cavium seems to appreciate all the accomplishments we have achieved over the last ten years." (See farther below for more comments from Ready and Cauchy.)
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