Greetings, and welcome to the MaxLinear conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brian Nugent, Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's pending acquisition of Intel's Home Gateway Platform Division. A press release issued before the open of the market today and supplemental presentation slides detailing the transaction are available in the Investor section of our website at www.maxlinear.com. Today's call will include remarks by Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer, and Dr. Kishore Seendripu, Chief Executive Officer of MaxLinear. We will open the floor for a question and answer session following the prepared remarks.
This conference call, the associated press release, and the presentations made available today contain certain forward-looking statements within the meaning of applicable securities laws, including, without limitation, statements with respect to the anticipated timing of the proposed transactions between MaxLinear and Intel, the anticipated effects of the proposed acquisition on MaxLinear, the prospects for MaxLinear following the proposed acquisition, including, without limitation, expectations with respect to MaxLinear's addressable markets, particularly Wi-Fi, opportunities within those markets, and the ability of MaxLinear after the acquisition to serve those markets, the growth strategies of MaxLinear generally, and expectations with respect to the impact of the acquisition of MaxLinear's growth strategies, expectations with respect to the products and customers of the company after the proposed acquisition, strategic and financial synergies anticipated to be realized from the proposed acquisition, including the anticipated impact on revenue and gross profit accretion, and current unaudited revenue estimates for the quarter ended March 31st, 2020.
These statements are based on MaxLinear management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements involve substantial risks and uncertainties, including risks arising from the acquisition of Intel's home gateway business, the integration of that business into MaxLinear, employee and customer retention, substantial competition in the home gateway market, average selling price trends, risks that our markets and growth opportunities may not develop as we currently expect, and that our assumptions concerning these opportunities may prove incorrect, uncertainties arising from the global COVID-19 pandemic, and numerous other risks outlined in the risk factors section of our current SEC filings, including our Form 10-K for the year ended December 31st, 2019.
Any forward-looking statements are made as of today. MaxLinear has no obligation to update or revise any forward-looking statements. In addition, we report certain historical financial metrics, including net revenues, gross margins, operating expenses, income or loss from operations, income taxes, net income or loss, and net income or loss per share on both GAAP and non-GAAP basis. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock-based compensation and its associated tax effects. Non-GAAP financial measures discussed today do not replace the presentation of MaxLinear GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business.
Lastly, this call is being webcast and a replay will be available on our website for two weeks. Now let me turn the call over to Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer of MaxLinear.
Thank you, Brian. As Brian mentioned, we have posted an investor presentation on our website to help guide you through this call. We are very excited to have signed definitive agreement to acquire Intel's Home Gateway Platform Division. Today, we will provide you the details related to the acquisition and highlight the strategic and financial rationale underpinning it. We will begin on page three. We intend to acquire Intel's Home Gateway Platform Division in an asset purchase for $150 million. We have secured $140 million in committed term loan A financing, and this, along with balance sheet cash, will be used to fund the acquisition. Pro forma debt at closing represents 2x gross leverage and 1.6x net leverage.
MaxLinear has been a successful acquirer. We believe that this opportunity will be another example of our ability to integrate quickly, realize improved efficiencies, and aggressively grow the business to drive significant value. Kishore is going to cover the rationale for the acquisition in much greater detail. I'll provide a basic overview. We're adding an established business with well over a decade of significant investment between Intel and its predecessors. We're adding significant R&D talent globally and world-class IP, particularly in the digital, software, and system-level domains. Historically, most of you are likely aware of Intel's presence in cable gateway markets with their SoC products comprising more than 50% of this revenue, while MaxLinear has been a strong partner on Intel's reference platform in this market. We expect the acquisition to significantly bolster the value we bring to our existing customers.
The strategic and potentially high-growth component of this deal is the Wi-Fi asset, which has had significant dollars invested into it over the past several years and is approaching several new product ramps. As you know, Wi-Fi assets are extremely valuable in the market right now based on the future growth of this expansive market. We're extremely excited about augmenting the existing Wi-Fi platform with our RF and mixed signal capabilities. This combination will bring significant value to our customers and partners while significantly expanding the dollar content and strategic relevance of MaxLinear across the broadband markets. Along with the growth opportunity in Wi-Fi and the strategic fit with the gateway business, this combination will bring scale to MaxLinear as well.
The added scale that this brings with the comprehensive technology, IP, and talent will enable us to bolster existing efforts in the Wi-Fi area, but also continue to grow and develop our infrastructure opportunities with our data center efforts and 5G massive MIMO opportunities. I'm going to circle back to discuss some of the financial metrics and outlook for this business. First, let me turn the call over to Kishore to discuss the strategic rationale in more detail.
Thank you, Steve. Good afternoon, everyone, and thank you all for joining us today. Turning to slide four, we are very excited to have signed this definitive agreement to acquire Intel's Home Gateway Platform Division. Strategically, this acquisition will not only enable us to better serve our customers and operator partners in the broadband market, it also more than doubles our served addressable market, which I'll address in more detail in a moment. Intel's Home Gateway Platform Division comprises Wi-Fi Access Points, Ethernet, and Home Gateway SoC products deployed across operator infrastructure retail markets sold directly and through distribution. With a diverse portfolio of established SoCs and components as well as an emerging set of Wi-Fi products, which, combined with an analog front-end and wireline connectivity products, should enable us to compete as an end-to-end solutions provider in the broadband cable and fiber markets.
Along with strengthening the value we bring to the cable market, we should also be well-positioned to expand our presence in retail and fiber to the home markets. In most cases, we have strong relationships with each of the key OEMs in this market, which will be enhanced by bringing together the full suite of the combined businesses together and focusing our sales and marketing efforts across this ecosystem. Intel brings strong design capabilities on a global scale and a unique IP portfolio, which have resulted in a strong competitive position for Intel across multi-gigabit broadband access markets dominated by two players.
Intel's global design presence is highly complementary, particularly its strength in Europe, which we expect to better enable us to attract and scale talent, improve customer support, and enhance our technology competitiveness, not only in broadband markets, but also in our exciting wireless and optical data center infrastructure market expansion initiatives. Intel's strong culture of engineering and operations excellence is well aligned with MaxLinear's ambition of becoming a world leader in broadband platforms, connectivity, enterprise, and infrastructure. This team has extensive experience navigating through operator qualification hurdles and OEM design iterations to establish itself with proven solutions across broadband access technologies. I want to welcome the talented Intel Wi-Fi access teams to MaxLinear. Perhaps most importantly, the business is on the cusp of unlocking new growth opportunities in the form of Wi-Fi, which we have long sought as a critical missing strategic element in our portfolio.
We believe that combining our analog mixed signal design capabilities with the critical software and system investments Intel has made will enable us to bring to market compelling new next-generation Wi-Fi 6 and Wi-Fi 6E solutions, addressing a critical operator challenge while adding significant dollar content to our platform. Even prior to our roadmap enhancements, this Wi-Fi asset has won significant design wins that are just starting to come to market. We expect Wi-Fi to be the catalyst for growth for the overall business. Financially, this acquisition significantly increases our revenue scale and is immediately accretive to free cash flow and non-GAAP earnings. Importantly, this acquisition significantly furthers MaxLinear's stated goal of increased revenue scale while enhancing the value of our analog and mixed signal footprint on existing Tier 1 customer platforms.
Our track record for executing on M&A integration gives us confidence in a belief that both financially and strategically, the acquisition of Intel's Wi-Fi and broadband business will prove to be a very compelling transaction, creating significant value for our shareholders, customers, and employees. While we are adding significant scale to our business, this particular asset has some characteristics of a tuck-in, in the sense that we are quite familiar with the technology ecosystem and the Intel team, with whom we have spent more than a decade partnering in the cable market. Turning to slide five, we estimate that this acquisition will more than double our SAM, or served addressable market, with an incremental $4.3 billion market opportunity for the business in 2019, and we estimate that the SAM will grow at a low double-digit rate over the next four years.
With the Intel asset, we'll be able to meaningfully expand our ownership and autonomy within our existing platforms. Also, in the future, by combining Intel's digital backend and software strengths with MaxLinear's competencies in CMOS-based RF mixed-signal DSP integration, we will be able to further integrate to develop unique platform-level solutions. This will enable us to deliver the lowest power, highest performance, and lowest system cost platform solutions for our customers. It will also enable us to deliver more complete and competitive solutions with higher levels of digital functionality, complementing our analog RF CMOS mixed-signal and DSP-based digital transceiver SoCs. The resulting increase in our dollar content in each of our customer platforms will enable us to deepen our OEM and operator partnerships and drive future growth. Turning to slide six, our businesses are strongly aligned with respect to end markets, customers, and sales channels.
With respect to products, Intel brings a diverse portfolio of gateway, Wi-Fi, and component solutions serving the cable, fiber, fixed wireless access, enterprise, and retail markets. Historically, cable gateway products have comprised more than 50% of the business, and this is where MaxLinear is a strong partner on Intel's reference platforms. At the same time, MaxLinear has direct relationships with all the key OEMs and operator partners in this market. Wi-Fi is ubiquitously present across not only most of our cable markets, but also opens up opportunities across the much broader market, which presents a significant, highly strategic growth driver for us going forward. In summary, we believe the complementary nature of this acquisition creates a significantly expanded SAM, increases our revenue scale, and should be immediately accretive to non-GAAP EPS and free cash flow generation.
With that, let me turn the call back over to Steve for a few more financial and strategic comments.
Thanks, Kishore. We'll give you some color on financial aspects of the acquisition on slide seven. We expect that Intel asset revenue contribution to be in the range of $60 million-$70 million per quarter in the first full quarter post-closing. There are a tremendous amount of synergies between the two organizations, and we look forward to realizing these synergies to drive the financial efficiencies to improve profitability of this business. The size and scale should enable us to see tremendous benefits in the cost of goods sold for the target and, in some cases, the MaxLinear side of the business as well. We are very focused on growing the business while focusing on sustainable products with higher gross margins. MaxLinear has been extremely disciplined in its effort to realize the value out of its portfolio, demonstrating great gross margins since its inception.
We expect to reduce overhead support required to run this business and improve margins through cost reductions. We also expect to consolidate existing resources into a combined structure, giving significant overlap in the suppliers and vendors. We're confident that the acquisition will be accretive to our operating margins within the first 12 months post-closing, and we have confidence in our prospects for overachieving relative to our internal synergy projections based on our extensive acquisition track record dating back to 2014. We expect the transaction to close during Q3 2020, subject to customary closing conditions and regulatory approvals. Lastly, today, we revised our Q1 2020 guidance due primarily to the coronavirus situation. We now expect revenue in the first quarter to be in the range of $61.75 million-$62.25 million.
While we are navigating an extremely challenging and uncertain demand environment, there are positive signs in the market as well based on needs in the data center market and 5G infrastructure builds and renewed need for broadband in the home. We remain focused on executing on our new product roadmap in the infrastructure market, and our portfolio and prospects remain strong in the data center and wireless markets. In summary, we see this transaction as financially and strategically very compelling in its ability to create significant shareholder value. This concludes our prepared remarks. We will now open the call for questions. Operator?
Thank you. At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today is from Quinn Bolton of Needham & Company. Please go ahead.
Hey, guys. Congratulations on the deal and the accretive nature of the transaction. Just wanted to ask on the Wi-Fi side, because that seems like it's driving most of the expected growth going forward. You mentioned a number of design wins that are just beginning to ramp, and wondering if you might be able to provide more detail. How broad are those design wins? Is it with one or two service providers? Is it broader than that? Is it geographically focused? Just hoping you might be able to provide any more detail, and then I've got a couple of follow-ups.
Well, thank you, Quinn. Obviously, you're familiar with our presence in the cable broadband market. There, we are partnered, so you're familiar with all the operators as a major North American, European, and Latin America and South American markets. There are multiple designs that are being design wins and ramps expected as these platforms turn over to the higher performance Wi-Fi. Intel Connected Home Division's secure design wins are at many of the major operators in the cable market. Beyond that, there have been significant investments in the fiber 10 G- PON markets, and those are primarily focused on the Tier 1 operators in Europe and North America. There are significant lead design wins that hopefully start ramping sometime towards the end of this year or toward the beginning of next year.
Given the coronavirus situation, we have to take a cautious approach. This is one of the most premium platforms that the Intel's Home Gateway Platform Division has in its assets. It's a complete BOM platform where the entire system is owned, including the Wi-Fi, the Ethernet, and the gateway platform, and all the processing associated with it. It's really the years of R&D investments from the Intel team has led to this position. Given our partnerships, we are very thrilled that we have been given this opportunity to not only acquire the customer relationships that we share, but also the world-class team that comes with it. We are really super excited about it. Wi-Fi is the underpinning of this. In the cable market, the BOM expansion comes from really the Wi-Fi design wins that have happened, where we have full visibility on it.
On the fiber platforms, the 10G-PON offering has been in the works for the last couple of years. Now it's at the brink of ramping. With that, we would get the Wi-Fi growth. Beyond that, there are some retail platforms where the design wins are known. They're major retail players in the access point markets. Those design wins also have been secured. There are a number of platforms across the operator and the retail on the access point side that will be ramping within the next 12 months. That will be a significant growth driver in these markets. Now, remember that this is beyond the broadband access market itself. Wi-Fi is ubiquitous in any broadband access beyond the wireline, whether it's coax or fiber. Broadband is a significant part of what 5G is and the densification of networks in the 5G.
Wi-Fi is going to be a significant part of that rollout in terms of the network densification. So is the case with the increasing broadband demand in enterprises. Even inside the home, Wi-Fi is going to be a major player. Combined with a comprehensive offering and connectivity with the Wi-Fi, our own power line, and offering with G.hn and as well as the MoCA offering, we will be the most comprehensive offering of multi-gigabit connectivity solutions inside the home as well, which leads to a portfolio that takes us towards the Internet of Things. There's a lot of exciting things.
For now, we need to stay focused on the integration and making sure that we bring this asset intact, especially the people who have developed the entire technology and who are our friends, and make sure that once we have secured all the promises we have made to our investors and to our employees, we can move forward with more detailed description of our markets.
Great. Just sort of a follow-up. You sort of touched on the higher dollar content as you bring in the cable modem, the PON or the Wi-Fi. Just, I guess maybe on the cable side, since I think most of us are familiar with your position in the radios going into cable platforms, can you talk about what's the dollar opportunity per gateway if you sell both the front-end and the back-end cable modem chip plus the Wi-Fi 6? I mean, is that something that takes you into the $20-$30 of content per gateway? Could it be higher than that?
It's very hard to really quantify that. I think it's pure guesswork at this stage, and it varies from platform. There are multiple grades of SKUs and platform. There are simple cable modem eMTA, there are fiber offerings that are the mid end, and then there's fiber offerings on the high end. The Wi-Fi is a multi- SKU capabilities all the way from 2x2 , 4 x 4, and 8 x 8. There's a lot of flavor there as well. I'm not yet competent enough to really understand where the average price is at this point.
I understand. Lastly for Steve, can you just talk to us about the governmental approvals you'll need before closing the transaction? Do you need U.S. approval, China approval, any other geography approvals?
Yeah. It's actually pretty modest. We just need HSR approval in the U.S., and we don't see any problems with that, but that should be a pretty quick turnaround. We also have work council approvals that we expect to see in a reasonable amount of time. Hopefully we'll get this thing done in Q3.
Great. Thank you.
The next question is from Gary Mobley of Wells Fargo. Please go ahead.
Hey, guys. Let me also extend my congratulations on the acquisition. It looks like a really nice acquisition and a solid fit. I wanted to start out by asking about your gross leverage assumption. I think you mentioned 2x gross leverage assumption, and I'm assuming the denominator there is the adjusted EBITDA. Is that right?
Correct.
Okay. That indicates, what, $174 million in combined adjusted EBITDA? Is that on a next 12-month basis post-acquisition close?
These are trailing numbers, Gary.
Okay. Right. I'm assuming this business is somewhat stable with respect to top line, or at least trending in line with the overall market.
Look, Gary, that's a very difficult statement to make in this pandemic environment. Clearly, I've seen our own forecasts in these markets very fluctuating dramatically. I would not want to call anything stable in this environment.
Fair enough.
The design wins are stable for sure. Market shares are stable. The quantity of the volume is highly volatile, let's put it that way, and purely driven by the environment we are in right now worldwide, right? I would love stable, but the design wins are absolutely stable.
Got you. Okay.
The other point I want to make is that this is the first time we'll have stickiness in the platform owing to the enormous software and systems investment that are so customized and specialized for a broad platform-level offering. That stickiness is what creates the enormous stability, the competency and the IP that went into developing that stuff.
Got you. Okay. This is obviously a two-horse race in the broadband CPE market. Could you give us some sort of update with respect to where you'll stack up against your other main competitor, both on the RF side and as well with this Puma SoC?
I think our platform has always been superior in performance on the RF side and on the SoC side. It has never been disputed about it. The processor technology capabilities that this asset brings are second to none. In fact, a far distant number one offering. The challenge has always been not having our own Wi-Fi offering the platform historically, and Intel has made significant investment. It's been a 10-year effort, and Intel took a very wise step of leapfrogging to the next generation technologies. As a result, they were one of the first two players to have a Wi-Fi 6 ready, even relative to our competitors in terms of a working product. It was the first retail product. Proven, it is one of the three reference platforms to be certified against in the certification body.
I would say that with the Wi-Fi now firmly in place, it is a second to none platform. I think the goal moving forward is how to bring our RF mixed signal and Intel's digital baseband technologies to create much more SKU and COGS efficiency, whether it's multiple packages being reduced to a single package, the testing efficiencies and so on to improving gross margins. While we have been partners, clearly, there are disadvantages of discrete offerings on the front end and the back end from Intel, right? Now we get the chance to put both the pieces together, and that's what will make it even more compelling relative to competition. The other thing I want to point out is that our competition doesn't have any power management offerings, right? We have been investing significantly through our Exar acquisition in power management.
If we just fast-forward to the next layer, next generation design win opportunities, power is going to be a huge part of it. That would create also a pretty meaningful expansion in the BOM content in the platform, not just the 2.5 Gb Ethernet, PHY and controller MAC technologies.
Okay. I'll hop in the queue. Thank you, guys.
Thanks, Gary.
The next question is from Ross Seymore of Deutsche Bank. Please go ahead.
Hi, guys. Congrats on the deal as well. Just wanted to get an idea, not in the near term, I know the pandemic makes near-term forecasts very difficult, but Kishore, you talked about, or I think Steve did, a low double-digit SAM growth with this. Is that the benchmark that we should look at this kind of $65 million a quarter run rate growing, or are there dynamics where you think it would grow faster or slower than that kind of SAM projection over the mid and long term?
Yes. We did talk about the SAM growth, and a lot of that underlying growth is around Wi-Fi and Ethernet, and that's really the exciting part of this. There are certain portions of the asset that are more mature products, legacy products that are lower growth. I think as you think about the entire asset, it's probably mid-single digits, but over the next three to four years, as Wi-Fi kind of grows into its size and scale, as these design wins start to ramp up, then that along with the Ethernet piece creates significant opportunities, and hopefully we can get up to that double-digit rate.
I know you talked about getting to operating margin accretion within 12 months. How do you guys attack the gross margin side? I would assume, as in most of these businesses, the gross margin is dilutive initially. Just talk about any sort of level that it's operating at, and then what are the steps you guys can take to get efficiencies on that line of the income statement?
Ross, you're exactly right. The gross margin is a big focus for us right now, and it's a focus in every angle, whether it be the size of the business, the focus of the business, what business we're taking, as well as the cost structure in COGS as well. That's where we think that we can realize some benefits on both sides. As we move forward together, I think we can realize some efficiencies on that front. We do see a path to getting it north of 60%. I think it will take a little bit of time, and it'll be dilutive probably out of the gate. One of the unique aspects of this transaction is that it is an asset purchase, and so we're able to carve up the pieces that we need to move forward with this.
A lot of these savings, or I’ll call them savings, but the cost structure that we inherit on day one enable us to make some meaningful improvements in the gross margins out of the gate.
Also, this being an asset purchase, there is some level of selectivity on the assets we are acquiring here, so that also helps us out of the gate.
Got it. My last question, I know times are very uncertain, but you also pre-announced where your inventories were. Kishore, can you just give a little bit of update on what you're seeing in the market as a whole right now for your existing business? You talked about some supply constraints, some limitations, et cetera. Any sort of just general update? I doubt you're going to comment on 2Q, but what's going on as you see it at the end of 1Q and maybe early 2Q as far as just the landscape as a whole?
I think, in the early part of Q1, we had challenges with the supply chains as China was a prelude to what we are going through in the U.S., right? China is now back. The supply chains are working. I would like to say luckily, despite all the efforts we have taken in the past being very deliberate, luckily for us, our supply chain is naturally fully recovered. What has been is really matching the demand side to the supply side rather than on the timing of it. We feel pretty good that at this point, if you were to ask me this question about our supply chain right now, it's very robust right now, and we see some very good places.
For example, we feel that the broadband access in the home demand is looking pretty healthy and actually has been better than what it's been the last couple of quarters. I would definitely say that I still want to hold reservation there. I think that everybody wants broadband at home, right? The demand is pretty high, and you know that the streaming companies are trying to deliberately reduce the resolution on the video content that you are seeing. I think it should help us, though I don't want to say how much it's going to help us. On the other hand, there are some other places where things look a little anemic. I think in balance, we feel cautiously positive in the new normal world right now. I wouldn't worry about supply chains looking into Q2. It was really a Q1 event.
On the other hand, the demand environment in certain aspects of business is looking quite healthy and actually positive on the broadband side. It's a mixed bag. It is what it is, right?
All right, guys. Congrats again. Thank you.
Thank you.
Thanks, Ross.
The next question is from Suji Desilva of Roth Capital. Please go ahead.
Good morning, Kishore. Good morning, Steve. Congratulations on the deal here. Can you talk about the Wi-Fi competitive landscape in the access business and whether you'd envision selling those point products outside of the Intel SoC, or whether it'd be kind of kitted and that's how the landscape would cleave?
It's a mixed bag, right? On the cable platforms, there is no need for any external process from anyone. In fact, the SoC that comes on the connected gateway platform is probably the world's most capable processor. It can process more bits than the Wi-Fi can spit out, even at 10 Gb, right? That's pretty good. There, we sell it that way. There's retail markets where we sell it as a standalone Wi-Fi, with Ethernet and stuff like that. It's a mixed bag, depends on the situation. Is it a dedicated apps processor? No, that would be a very simple derivative from this really wonderful, massively capable SoC that comes in this asset.
I'm pretty excited with the technologies, whether it's Ethernet capabilities inside network processing or even like Ethernet switch capabilities, but these category of products that have ubiquitous application, whether it's in a 5G infrastructure, transport markets, 5G infrastructure, ODU/IDU markets in backhaul, and wireless and millimeter wave. It's going to have applications across the board in sort of the capabilities it will bring to bear.
Okay. That's very helpful. Kishore, can you talk about the software intensity of the team you're acquiring? I know Wi-Fi has a very big software stack investment versus your team's software investment. Is there overlap? Is it a more software-intensive business? Is that the kind of intention to build more of a systems business overall?
If you really look at the size of the team, well, we have a pure play Wi-Fi company only a year ago, Quantenna, and the size of the team is in that range. The software team will be a little bit bigger given the fact that it is also an SoC platform. The entire platform has to work to not just the Wi-Fi standalone, and everything has to work seamlessly. The software team is in the size of what you saw in Quantenna. You can assume that to be anywhere between, I don't know right now offhand, around 200 to 250 range of people who are in the ballpark of doing software work. Please don't forget that we have our own software team that does the connectivity side, and that has all got the similar capabilities.
It's really a consolidated capability of connectivity assets on the software and system side.
Okay, that's very helpful. Last question on the outlook itself. Any update on the data center or 5G wireless infrastructure timings? I know it's very difficult visibility-wise, particularly the large data center customer for the 2Q, if that's on track. Thanks.
Our designing process is on track. People are doing some really interesting, creative things in terms of working remotely or in their home garages to test things, and things like that. It's a very interesting time. In one sense, a wonderfully creative time of remote working. Those are going well. Obviously, it would be a stretch of imagination to say that the end customer is on track, given that it's a soaking test on the optical data center for the 400 Gb case. I want to share with you that we are having a phenomenal traction on the 100 Gb per single lambda, dedicated 100 Gb PAM4 design wins. We're having great traction across China and the U.S.
On the 400 Gb side, of course, there's only one data center company that is going to be ramping, and we are going to be one of the suppliers, and that's going very well as well. Remember that this is a little bit one-layer supply chain, which is MaxLinear supplies to an optical PMD company, and the optical PMD company sells it to the end data center company. This end data center company clearly is the pioneer and the leader in driving much more network bandwidth, given they're the number 1 player in the cloud operations, right? Yeah, actually we're very quite excited. I'm more excited today about the designing process than I was in the last call and the timing of it. Unfortunately, we could not predict what the impact of this coronavirus is going to be.
Fair enough. Thanks, guys.
Thanks, Suji.
The next question is from Christopher Rolland of Susquehanna International Group. Please go ahead.
Hey, guys. Thanks for the question and congrats on the deal. This, I think could go one of two ways from your customers' perspective. They might be excited because Broadcom has packaged a lot of this together, had bundled it, probably adverse pricing, and you guys could benefit there as a holistic provider. On the other side, you're subscale when compared to Broadcom. I guess first of all, have you talked to your customers about this collaboration and what has the feedback been thus far?
Chris, on your musings about our competitors and adverse pricings and so on and so forth, I'm not in a position to comment. I believe markets are efficient and the prices are the prices, right? Obviously, our customers are highly supportive of this deal. Intel is a great corporate citizen. They want to make sure their customers are well taken care of and supported. Frankly, that's the reason they did this deal with us, right? Is that we have been partners, they have tested us as a partner. Their customers and our customers, joint customers, are familiar with who we are. They collaborated over 15 years. Absolutely, they received this very positively. Regarding the scale thing, scale is a very strong statement. Don't confuse revenues with scale because you have to figure out where the money goes in what market.
These are very dedicated markets, we will have absolutely the same scale they have on technology platforms, or better if you combine fiber and cable and those products and the platform. We'll bring power management to bear as well. I feel that we have not had a disadvantage in scale even before when we worked on the cable side because Intel's Home Gateway Platform Division operated quite independently. The revenue scale is the combination of the teams and what we can put together in terms of future roadmaps and synergies on the technology.
Got it. Then probably if you look at this business now, it's somewhere around break even, would be my guess. You guys probably have a pretty aggressive plan to move that op margin significantly higher, more towards your company average. I guess looking at this from an R&D perspective, where I think you're going to get most of this, can you talk to us about the work that needs to be done here? First of all, is this an x86 core or do you have to migrate this to ARM or not? Is it other widely available DSPs? I'm not quite sure there. Are there some other kind of tuck-in technologies that you're either going to have to license or develop around that to get the full platform that you want, something that maybe wasn't included in the deal? Thanks.
Chris, one of the great positives of this deal was Intel really made a wholehearted effort to make us wholesome in not needing any additional things that we have to acquire or to invest in because we had to get out of something, right? They made sure that we have a long roadmap with access to all the technologies that would be required. There is no such anxiety at all. We feel very comfortable that we don't invest in new technologies. The portfolio comes with all the processor capabilities that we need. The next generation of products will be continuations and revisions rather than brand-new overhauls. On the other hand, there are regular issues that are related to transfer, where third-party IPs, other companies' IPs are involved from other silicon vendors.
Let us say the CAD vendors or those kinds of companies, we have to acquire our own permission from them directly to be able to operate the business. What I mean by that, for example, we use EDA design tools from one of the vendors, and we need to get their permission to use the tools. Fortunately, these are already suppliers to us, so we feel very comfortable that that won't be too much of a difficult process.
Okay. This is not an x86 core in there that you have to migrate to Arm. Just following up on that, as I look to you guys getting to, let's say, a company op margin, how do I think about this? How much is coming from the R&D side? How much is coming from the COG side on manufacturing? Is that significant for you guys as well?
Chris. Yeah, I can speak to that. We talked a little bit about the gross margin, seeing a path to get this north of 60%. We definitely don't start there out of the gate, but there's significant improvements that can be made very quickly to get to that number within, say, 12 months. On the OpEx side and your comment around R&D and just operating margins in general, you're right. We do see a path to get this well north of our existing operating margins, and part of that comes with the OpEx. Some of that comes through the structure itself from the standpoint that we can realize a lot of synergies between the two businesses from the standpoint that we can leverage our sales and marketing efforts, our R&D efforts there.
Kishore has spoken a few times today about the leverage that we get even from our existing software capabilities. The consolidated effort will enable us to get this north of our existing operating margins.
Got it. Just on the x86 part.
Oh, you have to remember that the Connected Home group was built over a series of acquisitions in Intel. I do not know if I can speak for any of these things, but those companies were not Atom-based, right? The products that are shipping in revenues are spread over almost all the processors you can think in the world, right? To the extent that the x86 involved and the products are shipping with that, we have ensured that we have a go-forward plan that Intel is absolutely supportive of. I think I will leave it there. Okay.
Thanks, guys.
Thanks, Chris.
The next question is from Bill Peterson of JP Morgan. Please go ahead.
Yeah. Hi, guys. Good morning. Thanks for taking the question, and congrats on this deal. I guess first question is, if you think about the timing of this in terms of why now, obviously, it's understood that you together compete with Broadcom, but was there any issues on market share here in the near term that wanted you to, I guess, take on this asset to have more, I guess, provide more direction for the long-term combined entity, as opposed to always being sort of, not I wouldn't say reliant, but always just having the partnership with Intel? If you can comment on that.
Bill, I'm not sure exactly your question, but with regard to the timing, we have continued to be very committed to growing our infrastructure business. That's where we've been investing to really diversify the company into more infrastructure data center 5G efforts. We're just seeing those start to come to fruition. We've had tons of resolve around Connected Home and committed. We've never shied away from our interest in continuing to grow in that market. We've got great market share. This combination allows us really the ability to bring more of a solution to that existing customer base today. The unique piece here is it brings the Wi-Fi, right? By bringing Wi-Fi, that's where the value proposition is, along with some of the Ethernet capabilities that come also, gets that Connected Home group back up into a higher growth rate going forward.
Okay, no issues on the near term in terms of just your own share as it relates to the market. That's kind of what I was getting at.
Yeah.
Your business has been coming down.
Yeah. There's not been when we talk about market share, the challenge that we've seen a fair amount of challenges over the last 12- 18 months. Now, they're somewhat unique, right? You had a DOCSIS 3.1 ramp that our customer didn't get qualified early on, that was part of the dynamic. Last year, you saw operator spend come down altogether. I think what you've heard from us, even over the last, say, quarter and a half, is our commitment on the market share. Market share has been very good. We've not seen us lose any market share. In fact, we've seen the operators really committed to two silicon providers here. That's why I think we're excited about this, and we want to continue to show them that roadmap and our commitment to this space.
I also remarked in the earlier part of this session that we are seeing some positives. As we look forward, we are seeing an uptick in our demand for our broadband products, and you can imagine that will be true for these assets because we are coupled on the front. It's really a more positive view rather than that things are probably picking up and some trend reversals on the broadband side. The only reason of the caution is because this COVID-19 environment sort of gives you, is it a pattern here, right? Clearly the demand inside the home for people to use broadband and cable is the number one player in the U.S., that's clearly showing some good health. We feel that there is no risk to our market share.
Market share has always been stable, and cable will get back over time to what it was two years ago.
Okay. That's understood. Thank you. I guess when we look out now a few years, Intel themselves have talked about full duplex. I was hoping you can give us an update on that and what could this combined entity do to accelerate this or solidify your share. If you can comment on those opportunities as well.
There is one particular case where MaxLinear was also investing on the full duplex platform on the project basis, and Intel was too, coming at it from a different angle. You can see now where certain project level synergies are automatic, right? Both parties have pretty strong full duplex DSP technologies, but Intel brings with the whole processor capability in terms of the system partitioning. I think we're in a very good position, but I want to tell you that the cable rollout of the DOCSIS 4.0, the standard is just barely being finalized. I don't believe it's going to happen anytime in the next two years from a revenue perspective. I think we need to focus on DOCSIS 3.1 deploying worldwide in a bigger share and in a bigger way, and that's just beginning to happen.
Yeah. No, I understand. Okay, thanks for that. My last question, I guess when we think about Wi-Fi, how does the combined entity really compete in this space? We have Broadcom, there's Cypress, NXP, I guess ON with the Quantenna assets. A lot of these players especially just have really strong positions. What does the Intel team bring uniquely to the table with Wi-Fi 6 in order to compete?
Bill, the players you made are totally very different markets. They're all credible companies, there's a hodgepodge target markets you mentioned, right? If you look at the cable platform, there are only two players that matter, right? Until recently, one is the Broadcom platform with their Wi-Fi, and on the Intel platform there was the Quantenna solution at that time. We all know that, at least we feel that the platforms that are going to ramp, the Intel Wi-Fi is already designed in. Therefore I give you the context how it's playing out there, right? On the access point caliber side, the Cypress offering is not at all valid. That's really a retail IoT type offering. Low end, I would call it, and cost optimized for those markets. That leaves really on the high-end caliber side, there are three players, right?
One is Broadcom, one will be the MaxLinear Intel Connected Home combination, and Qualcomm, we shouldn't forget that. The Qualcomm offering is not in the CP side of the market, because on these platforms you need to have also the access side as an intimate offering with the Wi-Fi. In the platforms and markets we are in as a combined entity in the broadband side, there are really two platform offerings. One is the Broadcom platform, and the other one would be the MaxLinear Intel platform.
Okay, thanks. Understood. Congrats again.
Thanks.
Sir, no additional questions at this time. I'd like to turn the call back over to Kishore for closing remarks.
Well, thank you very much for joining us today and for your questions. We feel really excited about this combination acquisition that we're able to announce today. We're very confident in our plan to integrate our businesses and unlock the tremendous value, creating really great opportunities for employees, customers, and stakeholders with a financially stronger, more competitive enterprise. With that, I want to tell our Intel Connected Home employees that we really want to welcome to the MaxLinear team, and we're very excited to work together even more closer than before. Thank you very much once again.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.