Cavium fell the most in more than eight years Thursday after the maker of computer network chips said it will buy QLogic in a cash-and-stock deal valued at about $1.36 billion.
At least four analysts downgraded the stock. Some said they were confused about the timing and rationale for the purchase.
“With significant new product ramps coming … and core growth opportunities remaining at Cisco, it remains unclear to us why the acquisition of QLogic is necessary,” John Vinh, an analyst at Pacific Crest Securities, wrote in a note.
San Jose-based Cavium plunged as much as 18 percent, the most intraday since February 2008, to $39.58. It was down 17.5 percent at the close and 27 percent this year through Wednesday, before news of the deal was released. QLogic rose 9.3 percent to $14.80.
“We struggle to see the strategic rationale and see it as growth/margin dilutive for at least the intermediate term,” wrote Rick Schafer, an analyst at Oppenheimer. “We’re further puzzled by the timing of the deal with Cavium shares 25 percent off April highs. QLogic is a slow-growth asset at best.”
Cavium will pay $15.50 a share for QLogic — $11 in cash and 0.098 of a share of Cavium stock.
