SOA & WOA Magazine

What's a Linux operating systems company worth these days?

The answer apparently is not as much as the financing it's gotten over the years.

In a move reminiscent of Intel and Wind River, Cavium Networks, maker of specialty ARM and Mips processors, is buying MontaVista Software, the embedded Linux shop, for $50 million and it's only paying $16 million in cash. The rest is stock.

MontaVista, however, took in at least $93 million since it started 10 years ago from folks like Siemens, US Venture Partners, Alloy Ventures, NEC, IBM, Sony, WR Hambrecht, Samsung, Infineon, China Development Industrial Bank, Intel, Panasonic, Toshiba, Yamaha and RRE Ventures. A lot of those guys were MontaVista customers along with major accounts like Cisco, Dell, HP, Motorola, Alcatel-Lucent and NTT DoCoMo.

The deal is expected to close next month and Cavium is expecting the acquisition to be accretive to its non-GAAP earnings next year.

MontaVista brings the chip company multi-core embedded Linux products, virtualization skills, development tools, professional services and a string of Tier-1 customers.

After its acquisition MontaVista will run as a separate operating unit with its own president and retain its brand name as well as its own engineering, sales and product management. Cavium, which figures of providing complete solutions, says it will continue MontaVista's business model and support embedded Linux on multiple chip architectures including, of course, ARM and Mips.

Cavium figures to monetize design-wins early in the design cycle before products go into mass production by selling MontaVista's operating systems, productivity tools and professional services. MontaVista already supports Cavium widgets.

Intel paid $884 million for Wind River, about 2x expected revenues.