Analyst Conference Summary


conference date: August 23, 2007 @ 1:45 PM PT
for quarter ending: July 30, 2007 (2nd quarter fiscal 2008)

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Forward-looking statements

Overview: Revenues well above guidance. GAAP net loss, but non-GAAP income. First analyst conference where accounting restatement process is finished.

Basic data:

Revenues of $656.7 million were up 3% sequentially from $635.1 million, and up 14% from $574 million year earlier.

Net loss was $56.5 million, flipping from net income of $44.9 million year-earlier. This was also a deeper loss than the $52.8 million of Q1 (April 28, 2007 quarter).

EPS was negative $0.10 per share, flipping from positive $0.07 per share year-earlier.


Expect Q3 revenues about $710 million. Gross margin over 48%. $274 million non-GAAP operating expenses, with expenses growing slower than revenues. 19.4% non-GAAP tax rate.

Conference Highlights:

Non-GAAP net income was $39.7 million or $0.06 per share. This excludes stock-based compensation and amortization of acquired intangibles.

Revenue was above expectations from strong communications and applications processor sales and wireless LAN products. Storage showed some seasonal weakness. Believes growth will continue in Q3.

Cost of goods was $335.5 million. Gross profit $321.2 million. R&D $236.2 million. Sales and marketing $53.4 million. General and admin $33.8 milion. Amortization of acquired intangibles $36.3 million. Operating loss $40.0 million. Interest expense $6.8 million. Income taxes $9.6 million.

Beginning to see payoffs from investments in a broad range of technologies.

Completed restatements for 2003 through 2006 and caught up on SEC filings.

Our cell phone shipments were strong. Wireless LAN had strong sequential growth and expect that again in Q3 due to design wins going into production. Backlog is strong, in particular to wireless LAN products.

Strong design activity with PXA processors. Sharp launched models in quarter that used both the processors and Marvell low-power wireless LAN. Many other adoptions in handheld devices including GPS. Notebook LAN chips being widely adopted.

Hard disk drive markets are seeing some expansion due to Marvell technical advances. Expect to see growth in revenue and market share in enterprise HDD market.

Achieved a consumer optical storage breakthrough that should see revenues next year. Also High definition video processing chips for home entertainment. On way to providing a complete platform solution in this market.

Non-GAAP Gross margin was better than expected (50 basis point sequential increase) because of better product mix and operating expense did not grow as rapidly as expected.

Cash decreased $97 million to $496 million due to working capital requirements. Inventory was up relative to sales due to contractual Intel purchases.

Large increase in R&D expense over last year for consumer electronics and cell phone space entries. Will use resources efficiently to reach long term goals.


Wireless LAN vs. handset growth? About equal growth.

One time operating expense benefit? $5 million. That was included in non-GAAP operating margin.

How can you get more market share in storage (you have most of it already)? Investing heavily in new technologies.

Optical storage revenues, when will we see? Optical is foundation of this market; another piece is high-definition silicon. We are later than we thought on optical revenues. It is a large market opportunity. But we were earlier than expected with high-definition. Expect to have some revenue in calendar 2008, then a big increase in 2009.

Why did tax rate double? International tax regulations that have minimum taxes. Should come back down next year, but can't give details yet.

PXA effect on gross margin? Improvement's main driver is mix with PXA products produced by TSMC, which are now in qualification with end customer. Gross margin won't stabilize until we finish with Intel inventory and using all Marvell inventory. There are multiple products, so process will not be complete until end of fiscal 2009. 50% margin goal is for beyond this year.

Ethernet color? Getting major design wins from PC OEMs, but also some price pressure. So expect revenues to increase, but not rapidly. As we gain more customers growth could accelerate. Some design wins will be added to production by middle of next year.

Seasonality of consumer products? Q3 will tend to be strongest quarter seasonally.

So Q4 will be weaker? No, we should have more design wins by then.

Optical design win laser type? Both red and blue. Hard to predict which will produce more revenue.

Interest expense going forward? Will be the same, depending on interest rates, until the debt is restructured.

Bluetooth income? Have designs, working on potential customers.

Too early to talk about major PXA cellphone design wins, but it is just a matter of time.

HDD inflection? Does believe was some seasonality as inventories of drive makers were too low, but also gaining market share.

3G transition will increase demand for processor-dsp integrated chips next year; already sampling to customers.

Intel business revenues? Happy communication processor business is growing. Hoping to steer customers to integration of processors with other functions.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2007 William P. Meyers