Marvell's Intel Deal Creates Few Fans

Marvell's founders have shown a prescient ability to detect markets where the company can flourish, even in the face of tough competition.

But even if the cell-phone move ultimately pays off for Marvell, some wonder why Marvell was not able to get a better deal from Intel, which was widely reported to be looking to unload the business.

"I'm just surprised [about] why they didn't extract more pain from Intel," said Jefferies analyst Adam Benjamin. He points to the 1,400 employees Marvell will take on (a roughly 50% increase to its current headcount) as one part of the deal that could have been structured more beneficially to Marvell.

And given that Intel will continue manufacturing some portion of the chips for Marvell for the next two years, the companies could have shared some of the gross-margin impact, says Benjamin. (Jefferies makes a market in Marvell and Intel securities and has provided noninvestment banking services to Intel during the past 12 months.)

"Over the long term it's probably going to work out for them," Benjamin says. "It's just going to take a long time to play out."

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