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Summary
conference date: May 18, 2006
for quarter ending: April 29, 2006 (1st fiscal quarter 2007)
Overview: GAAP earnings showed a rare sequential decline, despite being up 15% from year-earlier. Revenue growth set a record and was above guidance, in contrast with earnings. Increased guidance for Q2 and fiscal 2007, even while being conservative on Maxtor projections.
Basic data:
Revenues of $521.2 million, up sequentially 6.6% (from $489 million) and 42.9% annually (from $364.8 million). GAAP earnings were $75.3 million, or .23 per share, down 23% sequentially (from $97.5 million or .30 per share) and up 15% annually (from $63.5 million or .20 per share).
Non-GAAP earnings rose to $141.1 million or .44 per share, compared to .27 per share for the year earlier quarter. Stock-based compensation and amortization of intangible assets accounted for most of the difference with GAAP figures.
Cash and equivalents were almost identical to a year earlier, at $921 million, despite use of cash for acquisitions.
Guidance:
Increasing 2007 guidance to revenues of 2.375 to 2.425 billion, but that is only if they lose Maxtor as a customer due to its acquisition. Gross margins 53.5%; operating income up 27.5%. For Q2: 580 to 585 million revenues; gross margins 53.4% with a 50 basis point increase in operating expenses.
Conference Highlights:
Q1 seasonality was less of a factor than expected as their customers continued to gain market share.
802.11n product shipments began in April; design wins with all five majors. 802.11n USB solutions will ship later this quarter; will have a very strong year. Mesh networking solutions for less-developed nations have been developed.
Q1 strong product momentum puts them in good position for the rest of the year. Gross margin of 55.1% was above guidance. Balance sheet remains strong. Inventory days reduced from 86 days to 79 days. $47 million decline in accounts payable.
Gigabit Internet market has healthy growth. Yukon controllers now shipping to Apple and white-box market. Seagate acquisition of Maxtor makes hard drive market prediction difficult; taking a conservative financial view, but are internally aggressive so customers can stay ahead of competition. In optical storage market, first products of partners based on Marvell technology are being prototyped; it is a good time to move into this market because of the transition to HD DVD. Avigo printer ASIC business acquisition completed; will leverage with in-house technologies.
Q&A:
PC market? Comfortable with exciting opportunities to grow business in this market.
Manufacturing? Ready to move quickly in either direction.
Cash generated in quarter? Disappeared into decline in accounts payable by $50 million.
PSP delay? Sony has made announcements indicating November release.
QLogic acquisition effects? Marvell's customers are gaining market share; storage business grew.
Wireless LAN and laptop market? Thinks are doing very well.
160 gig revenue? Believes almost all customers will be at 160 by end of year.
Inventory? Target is to trend it down to 60 to 65 days; should see some of that in Q2.
802 market? Believes within 2 years most of market will be 802.11n; but for a while it will just be at the top end of the market.
Seagate is moving to unified platform architecture; but the transition will take some time.
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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. Before making or terminating an investment you should always verify any factual basis of your decision from multiple independent sources.
Copyright 2006 William P. Meyers