Cavium Networks Signs Definitive Agreement to acquire Video Processor Specialist W&W Communications

Update: Cavium Networks buys W&W Communications (Nov. 2008)

Acquisition Propels Cavium into High-Growth, High Definition Video Processing Market

Mountain View, Calif., November 20, 2008 – Cavium Networks (NASDAQ: CAVM), a leading provider of semiconductor products that enable intelligent processing for networking, communications, security and wireless applications, today announced that it is has signed a definitive agreement to acquire W&W Communications, Inc.. W&W Communications is a fabless semiconductor company head-quartered in Sunnyvale, CA with an offshore center in Beijing, China. They are a specialist in market-leading low power, super low latency and full-High Definition video processing solutions with single and multi-stream capabilities. The purchase price of the acquisition will be approximately $19.3 million, subject to certain purchase price adjustments, and includes the retirement of certain liabilities of W&W Communications. The acquisition is expected to close in December 2008.

Video traffic over the Internet has been growing exponentially and is forecasted to be over 90% of all consumer traffic by 2012, according to Cisco’s Visual Networking Index study. Currently, Internet video on the PC is the primary driver of this growth. Moving forward, Internet delivery of video to the TV followed by cost effective, High Definition (HD) interactive video communications is expected to fuel the future growth of video traffic over the Internet.

The digital video market consists of five distinct segments, namely capture, process, transport, receive and display. Today Cavium Networks’ single and multi-core processors are used in a range of video transport applications. High performance, video encode and decode capabilities are needed in the capture, process and display market segments. High end applications in these markets require encode and decode with pristine video quality, super low latency, single and multiple HD video stream processing up to 1080p at 60 frames/second and beyond. These requirements today are primarily delivered by multi-chip DSP based solutions. Low end requirements which include decode only or encode of low resolution streams are primarily delivered by ASIC based solutions.

W&W Communications’ unique video technology is an excellent fit for high end video application requirements where high-quality, super low latency and high channel density are needed. W&W Communications provides a range of chips, software and board level solutions for single and multi-channel, High and Standard Definition H.264 applications at up to full 1080p encode and decode at 60 frames per second.
“Pioneer Televisions and Multimedia equipment set the standard for high-quality in the industry,” said Junichi Shibata, Project Leader at Pioneer Home Entertainment Business Group. “After testing a number of different video codecs in our labs in Japan, we have determined that W&W Communications’ H.264 video codec technology is the best and only codec that meets our stringent quality and low latency requirements.”

“Cavium Networks is a leader in intelligent processors enabling next generation networks,” said Syed Ali, President and CEO at Cavium Networks. “This acquisition marks Cavium’s entry in to another high-growth market. We see video processing as a key technology for a wide range of next generation, high volume video enabled applications. Combining high-quality, low latency video codec technology with Cavium’s MIPS and ARM based processors will enable Cavium to deliver compelling end to end solutions for the entire digital video cycle.
We have been working with W&W Communications on joint reference designs combining our processors along with their video processors. We are highly excited about the prospects of this technology based upon customer feedback that we have received.”

W&W Communications proprietary, patent pending Super Low Latency (SLL) Technology™ produces perceptual lossless video quality and delivers the industry’s lowest latency at sub-frame encode-decode delay. Other features include a flexible encoder toolset with in-loop de-blocking filter, single-pass bit rate control, content-adaptive noise filtering, programmable cost functions for motion vector and prediction mode coding, efficient search algorithms, large search area, 1/2 and 1/4 pixel motion estimation interpolation and error resiliency and concealment. The core technology is based on a scalable parallel architecture, which is designed to meet future higher resolution, quality and channel density requirements, while providing low cost and power consumption per stream. The current W&W Communications’ processor provides a single chip solution for up to 4 HD, 8 SD and 32-CIF streams at full frame rate at dramatically lower cost, power consumption and footprint over existing multi-chip DSP implementations. W&W Communications’ processor has recently been honored with the prestigious CES Innovations 2009 Design and Engineering Award in the category of Enabling Technologies.

W&W Communications’ technology addresses a broad range of applications in consumer, enterprise, service provider and digital video surveillance markets. Consumer applications include next generation media enabled home gateways and media servers, wireless HD for TV, laptops and game consoles and HD video capture for fixed and mobile applications. Enterprise applications include high-quality Telepresence, Video Conferencing, Video Surveillance, Video Telephony, Tele-medicine and Distance Learning. Service provider applications include multi-channel video transcoding and transrating for Video on Demand and content distribution services.

“W&W Communications has developed compelling video processor solutions and we have significant traction with multiple Tier-1 vendors,” said Lars Herlitz, President and CEO of W&W Communications. “We are excited to be part of an exciting and dynamic company. We look forward to accelerating our design win momentum significantly by leveraging Cavium’s customer relationships, sales channels and financial strength.”

Conference Call
Cavium Networks will broadcast a conference call today, November 20, 2008, at 2:00 p.m. Pacific time (5:00 p.m. Eastern time) to discuss more details regarding this acquisition. The conference call will be available via a live web cast on the investor relations section of the Cavium Networks website at http://www.caviumnetworks.com. Please access the website at least a few minutes prior to the start of the call in order to download and install any necessary audio software. An archived web cast replay of the call will be available on the web site for a limited period of time.

About Cavium Networks
Cavium Networks is a leading provider of highly integrated semiconductor products that enable intelligent processing in networking, communications, storage and security applications. Cavium Networks offers a broad portfolio of integrated, software compatible processors ranging in performance from 10 Mbps to 20 Gbps that enable secure, intelligent functionality in enterprise, data-center, broadband/consumer and access & service provider equipment. Cavium Networks processors are supported by ecosystem partners that provide operating systems, tool support, reference designs and other services. Cavium Networks principal offices are in Mountain View, CA with design team locations in California, Massachusetts and India. For more information, please visit: http://www.caviumnetworks.com.

About W&W Communications, Inc.
W&W Communications is a fabless semiconductor company, which develops best-in-class video compression solutions for consumer, professional, enterprise and infrastructure applications. The company is headquartered in Sunnyvale, CA with an offshore center in Beijing, China.