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conference date: August 17, 2006
for quarter ending: July 29, 2006 (2nd fiscal quarter 2007)
Overview: All information presented is preliminary due to an internal review of stock-option accounting practices. Guidance is for only a 1% increase in revenues for Q3.
Used time to have a great Q&A session (see below).
Basic data:
Revenues were $574.0 million, up 10% sequentially from $521.2 million and up 47% from $390.5 million in the year-earlier quarter. It is below their guidance from the prior quarter of $580 to $585 million.
Guidance:
Q3 conditions will be similar to Q2. Concerned about PC, 802.11(n) and storage demand. Revenues will be up only 1% from Q2. Lowering fiscal 2007 guidance from 2.37 to 2.45 billion to 2.27-2.29 billion. Q3 operating expenses will grow significantly faster than revenues.
Conference Highlights:
Some end markets such as PC market are encountering short-term challenges. Marvell is focusing on long-term goals.
Most products performed as expected. Q2 is usually a seasonally challenging quarter for storage, but storage revenues increased. Wireless market is seeing increased demand. Began shipments to new gaming product. Printer ASIC revenues, a new segment, were as expected.
PC, and gigabit ethernet products, 802.11(n) all had demand below expectations.
Gross margins decreased in line with expectations due to lower margin printer ASIC business.
Ended with less cash due to Avago acquisition in cash. $125 million positive cash flow from operations.
Worlds's first integrated wireless LAN and Bluetooth with CPU chip was announced today. Consumer devices are taking advantage of wireless capabilities.
802.11(n) retail solutions getting strong adoption. There are some near term inventory issues. Believes will be adopted by many new devices, including high-def video.
Printer market has great growth opportunity. Increasing content in printers.
Xscale acquisition with Feroceon allows advanced solutions will drive market share growth in storage market. Have invested heavily in storage technology.
Cell phone chip acquisition from Intel provides an opportunity to break into a market dominated by a few other suppliers. Will focus on advanced 3G phones. Positive feedback from Intel customers.
Q&A:
Future growth rates? Believes Q3 slowdown is temporary. Believes long-term growth rate will be good.
Visibility or customers? Believes customers are not as confident.
Desktop business? Accelerating solutions that will get into desktop storage products. Confident will win this business in long run.
Avago printer ASIC business? Going very well. Good relationship with HP. Won a number of designs since May 1. Will report on margins possibly next quarter. But need to integrate Marvell's other solutions into the printer products.
Q4? Guidance is conservative, hopes reality will be better.
Intel base band processor? Marvell is now only 1 of 2 independent providers for 3G market. Revenues in part depend on how long it takes for 3G market to take off. Xscale has great software including a 3rd party ecosystem. Majority of Intel employees will make the move with the company. Protocol stacks not an issue.
The PC products weekness were the chips they provide to Intel.
Wireless 802.11 will grow in Q3, just not 802.11(n).
Marvell missed Bluetooth boat when adopted for cell phones, but now has Bluetooth and integrates it with WiFi, so they believe will be a big market.
Agere? Marvell is typically ahead of them by 1 to 2 years. Still needs to win desktop space; already won mobile space. Doing just fine with market share. Does not agree that Agere is gaining market share.
Feels confident in gross margin operating model put forward in previous conferences.
Cell phone market adopts technoloies slower than PC market. Game market adapts most quickly.
Expects their storage growth to look like hard-drive market growth numbers.
Design wins on Bluetooth/WiFi chip? Yes, with tier 1 customers. Should see revenues second half of next year. Reduces costs for clients.
Too much inventory? No, comfortable with inventory levels.
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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.
Copyright 2006 William P. Meyers