Analyst Conference Summary

Marvell Technology Group

conference date: May 9, 2008 @ 1:45 PM Pacific Time
for quarter ending: May 3, 2008 (1st quarter fiscal 2009)

I own MRVL
Forward-looking statements

Overview: Revenue way better than guidance, seasonally down sequentially, and up 27% from year-earlier. GAAP earnings solidly in the black.

Basic data (GAAP) :

Revenue was $804 million, down 5% sequentially from $844 million, and up 27% from $635 million year-earlier.

Net income was $70 million, well up sequentially from $1 million and reversing a loss of $53 million year-earlier.

EPS (earnings per share) were $0.11, up sequentially from zero and up $0.20 from a loss of $0.09 year-earlier.


Fiscal Q2 2009: revenues of $830 to $840 million, up 26 to 28% from prior year. Non-GAAP gross margin 51% to 52%. (But long term Non-GAAP gross margin model remains 50%). $280 to $285 million in operating expenses. 6% to 8% tax rate. 630 to 635 million share count. Will pay down debt.

Conference Highlights:

Clyde R. Hosein was named Chief Financial Officer, effective June 23. George de Urioste will move from CFO to Acting Chief Operating Officer. Acting Chief Operating Officer and Chief Technology Officer (CTO) Pantas Sutardja will be the full time CTO.

Revenue targets were beaten despite "continuing pricing pressures in our core markets," in what is normally a seasonally weak quarter. Cost cutting paid off.

Hard-disk revenues were sequentially flat, when they are normally seasonally down. Our customers continued to gain share and notebook drives also showed growth. Our products are a year to year-and-one-half ahead of our competition.

Cellular and mobile devices revenues were in line with expectations. Demand for EDGE communications processors was strong. High volume shipments of HSDPA processors for smartphones began. Application processors were introduced in several new products. Manufacturing has shifted from Intel to offshore, and costs should continue to come down even as performance increases. SOCs incorporating processors have major design wins. We have the largest development team working on ARM processors.

Enterprise networking market showed normal seasonal declines. Wireless connection products and NAS (Network Attached Storage) processors had stronger than expected revenue. There was growth in the printer chip market.

Non-GAAP gross margin was 52%, up from 48.7% sequentially. Non-GAAP net income was $150.4 million or $0.24 per share, up from $0.05 per share year-earlier.

Marvell received a one-time $24.5 million directors and officers liability insurance payment, which covers accrued tentative settlement with shareholders. Marvell agreed with the SEC to pay a $10 million civil penalty for past stock option practices.

Cost of goods sold was $389 million. Gross profit was $415 million. R&D expense was $238 million. Selling and marketing expense $47 million. General and Administrative expense was $13 million. Amortization was $35 million. Leving operating income of $82 million. Interest expense was $4 million. Income tax provision was $9 million.

Continues to have design wins for new hard disk drive systems. Customers very happy and believes will continue to win market share. Solid State Storage controller will be announced next week and is an additional market opportunity.

There was strong order linearity, resulting in increased accounts receivable. Inventories were down.

Western Digital was the only over 10% customer for the quarter.

$774 milllion cash balance up $143 million sequentially. Cash flow from operations $155 million.


Drivers of revenue growth for coming year? Drivers are products that were developed many years ago. New product introductions will not contribute significant revenue until further in the future.

XScale effect on margins? XScale margins improved with moving manufacturing from Intel. So in long run Siva processors should address mainstream high-volume market. Keeping 50% gross margin model mainly because of macroeconomic effects including possibly rising costs (inflation).

Remaining Intel-sourced inventory? It has a long shelf life and should sell off in next few quarters.

Growth driver in hard drive controllers? Revenue drivers are the current hard drive controllers. SSC (Flash drives) won't be a volume market this year, but we are introducing products that will be able to address a potential ramp in a year to two years.

Are cellular gross margins over 40% now? Yes. And in the long-run they can improve further.

Inventory at customers and in channel for PC supply chain? Inventory seems to be in line with the season we are in.

Customers for cell phone chips? Majority of customers buy application processors but use someone else's base band. Samsung, Trimbal and Garmant became new customers this year. No comment on how big of a customer RIM is.

Optical product revenues? We were working on HDDVD with Toshiba, but that standard died. So now we are focussing on BluRay, but we are early in that process. We might see a ramp in calendar 2009.

.11n wireless revenue was up sequentially. Was not addressing PC market, but now are looking at that.

Headcount? 5320. Will add only absolutely necessary employees this year.

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Copyright 2008 William P. Meyers