MRVL
Marvell Technology Group

Summary

conference date: February 23, 2006
for quarter ending: January 28, 2006 (4th quarter)

Overview: record quarter for a company that consistently generates rapid growth; in this case net income per share was 66% higher than year-earlier. Earnings were .01 above analyst consensus expectations. A 2-for-1 split was announced, but won't take place until after June.

Basic data: Sales of $489 million (up from $340 year-earlier), generating $97.5 million or .30 per share GAAP earnings. Excluding special charges, earnings were .42 per share, compared to .24 year-earlier.

Cash and equivalents ended at $921 million. Generated $185 million cash, but paid $180 million to Qlogic for their hard disk controller business.

Guidance: First quarter 2007 sales of $513.5 to $518.3 million despite seasonal softness.

Fiscal 2007 revenues $2.25 and 2.30 Billion. Gross margin should be about 54%.

Conference Highlights: Consumer OEMs are rushing to put out products that include converged technologies, which Marvell has specialized in creating chips. Storage, wireless, cell phone, and network chip revenues are growing strongly. Enterprise products were about 70% of sales, consumer products about 30%. Gross margins continue to increase.

Concerns about capacity availability have been met by increased inventory, but now expect decline in inventories in 1st quarter 2007 (that is the current quarter). Expect strong market adoption of gigabit Internet as part of complete-system (SOC, system-on-chip) approach.

New designs have already won contracts with companies like Apple. Non-PC hard-drives are driving controller sales. Embedded wireless for consumer markets (games, cameras, cell phones, PDAs) is being adopted widely. 802.11(n) products are ready for adoption. Orion line targets media vaults; initial shipments starting this quarter. Entering printer market and acquired Avago Technologies (HP is client).

Q&A:

Qlogic: first 2007 quarter will reflect full quarterly revenues.

Organic v. acquired business growth rates: Growth rate guidance is combination. Prefers organic growth but by buying Avago was able to quickly add capacity to server HP.

Plans more acquisitions over time, but no specifics.

Printer business: how long to translate to SOC solution gross margins? One design generation. Already getting some wins using ARM processor.

Maxtor business: 2nd calendar quarter will see chips for next generation; welcomes Seagate addition.

WiFi competition: how long before competition results in price drops? Marvell anticipated embedded market, leaving competitors behind. Years of software development were required, so anticipate their advantage will last for some time. Increase in consumer opportunities will offset price decreases in near-term.

Similar advantages exist for Marvell in other markets (DVD, printers, etc.) which will start to show revenues in the 2nd half of calendar 2006.

Has improved its ARM processor to be competitive with high-end MIPS processors, but are not targeted for stand alone; they are for embedded. It is easy to convert code to ARM.

Hopes rapid growth of consumer business may lead to 50/50 split with enterprise business; likely acquisitions will help with this growth, but much growth will be organic due to tech already developed.

Operating expenses in Q1 are seasonally higher.

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. Before making or terminating an investment you should always verify any factual basis of your decision from multiple independent sources.