Competitor turns supplier as the "new owner"! Bank of America: Marvell Technology's acquisition of Lumentum may prompt Cisco and Ciena to seek other sources

According to Jinse Finance APP, Bank of America analysts stated that Marvell Technology (MRVL.US)'s acquisition of Lumentum (LITE.US) may prompt Ciena (CIEN.US) and Cisco (CSCO.US) to diversify their optical component suppliers.

Chipmaker Marvell Technology announced on Monday that it will acquire data center laser manufacturer Lumentum in an all-stock deal valued at approximately $115 billion. If completed successfully, this transaction (in terms of equity value) would not only be the largest global acquisition since 2026, but also the largest deal in the global technology industry excluding the merger of SpaceX (SPCX.US) and xAI.

The merged company will be able to combine Marvell Technology's chips, signal processing, and interconnect technologies with Lumentum's lasers, optical devices, and manufacturing capabilities. This means the company has an opportunity to move from providing single chips or optical components to offering more comprehensive high-speed interconnect solutions.

For Ciena and Cisco, this significant deal brings an important supplier of lasers used in high-speed network products under the umbrella of a competitor. Presently, both Ciena and Cisco procure optical components from Lumentum, while Marvell Technology competes with them in the coherent pluggable optical module market (products used for transmitting data over optical networks).

Bank of America analysts said: "We believe this could increase risks related to pricing and capacity allocation, or simply the risk of enterprises relying on competitors for critical component supply, especially given the ongoing tight supply of lasers."

However, analysts also believe that Marvell Technology has little incentive to disrupt Lumentum's existing customer relationships, as this could lead to a loss of sales and potentially worsen supply bottlenecks across the entire industry. Ciena accounts for 15% of Lumentum's revenue in fiscal year 2026, making it a key customer. Previously, Ciena noted that there were restrictions on pump laser supply and that certain optical components depend on a limited number of suppliers.

This risk is particularly pronounced for narrow linewidth lasers, as these lasers serve as the light source for coherent pluggable optical modules. It is believed that Lumentum is the main supplier of narrow linewidth lasers to both Ciena and Cisco.

Cisco's market share in the 800G ZR and ZR+ coherent pluggable optical module market has remained at around 60%. Meanwhile, Ciena's market share is expected to rise from 17% in 2025 to about 35% in 2026. As this transaction is expected to be completed only in 2028, it gives both companies time to develop alternative suppliers or their own laser technologies. Reportedly, both are working on their respective alternatives for narrow linewidth lasers.