Analyst Conference Summary

Marvell Technology Group

conference date: November 18, 2010 @ 1:45 PM Pacific Time
for quarter ending: October 30, 2010 (third quarter fiscal 2011)

I own MRVL
Forward-looking statements

Overview: Excellent quarter, nearing a billion per quarter in revenue. But Q4 to be seasonally down slightly.

Basic data (GAAP) :

Revenue was $959.3 million, up 7% sequentially from $896.5 million, and up 19% from $803.1 million year-earlier.

Net income of was $255.7 million, up 16% sequentially from $219.8 million, and up 27% from $201.6 million year-earlier.

EPS (earnings per share) were $0.38, up 15% sequentially from $0.33 and up 23% from $0.31 year-earlier.


Q4 fiscal 2011 estimated $900 to $960 million revenue, down 3% sequentially at midpoint, all from seasonal decline in gaming wireless LAN chips. Non-GAAP gross margin 59.5%. Non-GAAP operating expense $260 to $270 million. $0.40 to $0.44 non-GAAP EPS. With about $0.06 less GAAP EPS.

Conference Highlights:

"We delivered excellent results ... at the high end of our original guidance," said CEO Sehat Sutardja.

Non-GAAP results: net income $307 million, EPS $0.45. Gross margin 59.5%, 32.4% operating margin.

Cash flow from operations was $368 million. Free cash flow was $338 million. Cash and equivalents ended at $2.68 billion, up about $300 million sequentially. Inventories were $227.9 million, down 5% sequentially. $61 million spent to repurchase shares.

Mobile and wireless end market sales increased over 20% sequentially and were about 35% of total revenue in the quarter. Cellular communication processors led to 2/3rds of growth, and strong seasonal demand for embedded wireless LAN products for games led to 1/4th of growth. In Q4 expect embedded wireless LAN for games to be seasonally down. Overall 10% mobile and wireless decline in Q4.

Networking end market sales declined 9% and now account for 17% of total revenue. Enterprise market was weak. In Q4

Storage up 3% seq, rep just over 40% of total revenue. For Q4, expect to be flat sequentially.

New product revenue $87 million, about 9% of total revenue, mainly from mobile end wireless market.

Cost of goods sold was $390.8 million, leaving GAAP gross profit of $568.5 million. Operating expenses of $309.5 million included: research and development $218.4 million; selling and marketing $39.8 million; general and administrative $26.6 million; amortization of acquired intangibles $21.8 million. Other expense was $1.7 million. Income tax provision $1.6 million. On non-GAAP basis operating expenses were $260 million, below guidance.


Mobile and wireless embedded Wi-Fi v. handset customer guidance? You need to look at the supply chain, which includes consumer purchases. After 2 strong quarters, it is just a seasonal timing issue.

HDD (hard disk drive) outlook? It is just that January will be in the fiscal quarter, so flat forcast is consistent with end-market projections.

Mix of gaming versus communication processors? We don't disclose the mix. In 2011 we expect the smartphone market will grow substantially, and we intend to grow at least at the market rate.

Does not expect inventory work through in enterprise networking to last long.

Why op ex expected up in Q4 when revenues not expected up? We have a lot of new products coming out, we don't invest on a quarter basis, we intend to continue to grow R&D to sustain revenue growth.

Our HDD business is so big that one customer ramping one product won't move the needle.

Parameters for buy back are total buy will be $500 million, we did 10% of that in the quarter, we will continue to buy, there is no other metric.

Do you expect to see tablets or solid state drives (SSDs) cannibalize HDD? Tablets will have an impact, however, notebook market will continue to grow because they are priced lower than tablets. HDD currently flatish due to the economy, but in long run will continue to grow. Also we sell SSD controllers, and they are higher priced than HDD controllers.

China Mobile update? TDSCDMA application processor chips is going very well. First handset customer shipping this quarter. Other manufacturers will ship in second half of next year.

Tablet computers using Marvell chips should come to market next year.

Armada chip is trending positively. One of the products it is in is doing very well.

We are having discussions about paying a dividend.

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Copyright 2010 William P. Meyers