Analyst Conference Summary

Marvell Technology Group

conference date: March 6, 2008 @ 1:45 PM Pacific Time
for quarter ending: February 2, 2008 (4th quarter fiscal 2008)

I own MRVL
Forward-looking statements

Overview: Great quarter, with strong sales and non-GAAP net income growth.

Basic data:

Revenues were $844 million, up 11% sequentially from $758 million and up 36% from $622 million year-earier.

Net income was $1.3 million, reversing a loss of $6.4 million in fiscal Q3, and a loss of $140.6 million year-earlier (fiscal Q4 2007).

EPS was $0.00, up sequentially from a loss of $0.01, and from a loss of $0.24 year-earlier.


Fiscal Q1 2009: normally seasonally weaker. Revenues $775 to $785 million. Non-GAAP gross margin 48.7 to 49.3%. $290 to $295 million non-GAAP operating expenses. Tax rate effectively 8 to 10%. Diluted shares 633 million.

Conference Highlights:

Non-GAAP numbers: net income $122.9 million of EPS of $0.20 per share, up 495% from year-earlier. Gross margin 48.7% up 0.5 from year-earlier. Non-GAAP numbers exluded stock-based compensation of $70 million, amortization of $44 million, and restructuring of $8 million.

Revenue above guidance of 3% increase was due to better than expected demand in disk storage, enterprise communications, and cell phone markets.

A tentative settlement has been reached regarding lawsuits based on historical stock option practices. $16 million has been accrued for this.

Long term view is Marvell is a product cycle company. New product transitions help us. High-integration products for mass market allow us to grow faster than overall electronics market. High teens to low-twenties y/y revenue growth is our expectation, but depends on product cycles. For fiscal 2009 storage (enterprise hard drive) market will benefit us. Our chips have an advantage in notebook PC hardrives. Wireless growth being driven by new standards and key design wins, including cameras and game consoles. Cell phone application processor shipments going well, faster growth will be driven by design wins during year. We see no share loss during year, and new designs are coming online. We'd like to tell you more about design wins, but can't because of confidentiality obligations with customers.

Cost of goods sold was $439 million. Gross profit $406 million. Operating expenses of $427 million included $266 million R&D, $61 million sales and marketing, $48 million general and administrative, $44 million amortization, and $8 million restructuring. Operating income was negative $21 million. Interest income $19 million. Tax benefit $3 million due to international issues.

Cash and equivalents ended at $631 million, up about $100 million sequentially. There is a $391 million term loan outstanding. Accounts receivable exceed accounts payable by about $100 million and inventory was $419 million, up due to completion of Intel supply agreement. Days of inventory were 86 days, flat sequentially. $163 million cash from operations, $32 million used for capital expenses.

Intel supply agreement for cell phone processor has ended, and liability balance has now made a one-time benefit of $22 million.

Order linearity was good. 20% storage product revenue increase sequentially, and over 30% y/y. Application processor demand was above seasonal. Over 20% sequential increase in PC-related revenue. Wireless was less than anticipated, revenue was down, believe that is a temporary situation. Printer product sales were near flat sequentially.


3G baseband revenue recognition? Will begin some time this year, 2nd half.

Enterprise SOC? Just 1 customer this year, but is dominant in that business.

WiFi + Bluetooth? Various engagements in various stages, should ship 2nd half.

Debt plans? Our debt has a variable rate, so has been resettng lower. Believes better use of cash in near term that paying off the debt.

Order patterns this quarter? Linearity is good.

Enterprise communications? Continue to invest in creating new products. Hopes to see that translate into higher revenue over the next year. Also preparing to embed our processors into these products.

Future legal expenses? Generally declining, but may be lumpy.

3G cell phone ASPs? Will be higher than previous generation.

Storage chip lead times? No impact to customers from increased demand. Gaining market share and maintaining pricing. Our main customers are gaining share from our non-customers.

Xscale supply? Completed all purchases necessary under the agreement. Transition will help gross margin. But now getting into a new phase of producing new products from ground up and with better fab processes.

GPS products? Adoption in cell phones depends on cost issues. Looking at how to reduce GPS technology costs to go into Marvell platform. Have done some demos for early customers. It might start to drive revenues next year.

Inventory levels? Feeling pretty good about inventory in channel.

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Copyright 2008 William P. Meyers