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conference date: May 17, 2007 @ 1:45 PM Pacific
Time
for quarter ending: April 28, 2007 (1st quarter fiscal 2008)
Forward Looking Statements
Overview: Revenues below guidance but up sequentially.
Basic data:
Revenues were $635.1 million, up 2% sequentially from $622 million and up 22% from $521.2 million year-earlier.
$593 million in cash and equivalents.
GAAP data not available because of need to restate accounting of stock option compensation
Guidance:
Seasonality in storage is persisting into Q2. Revenues should increase to about $645 million, with a slight improvement in gross margin. Expect expenses to grow below rate of revenue growth in second half of year.
Conference Highlights:
Limited growth in Q1 revenues due to demand weakness in some markets. Seasonality was more pronounced than anticipated, especially in hard drive market.
Guidance was $640 to $650 million, so did not make low end of February guidance.
Other than hard drive components, products did about as expected. Wireless LAN was down a little.
Western Digital and Samsung were 10% customers
Gross Margin was slightly better than expected due to operational efficiency.
Operating expenses ended higher than expected due to accounting review process.
Other expense included $5 million one time charge due to an impaired investment.
Cash decreased by $3 million sequentially.
Advanced solutions are positioned to make large gains in a variety of markets. Cell phone market looks encouraging because of good operational efficiency and customer reaction to new products. Have seen design activity by companies that were previously not using XScale. Design activity is moving beyond cell phones and PDAs.
Wireless LAN and Bluetooth continue to get design wins. Combined, integrated chips will ship in volume in second half of year.
Gigabit Internet transition is providing strong growth. Leading in hard drive technology, including Samsung and Toshiba new introductions. Introducing a breakthrough hard drive chip technology next year.
Made good progress in transition to 65 nm technology. We made 90nm cores that would be portable to 65 nm.
Q&A:
Storage outlook for Q2? Expect storage to be a little soft. Expects pick up in second half of year.
Consumer wireless LAN should pick up in 2nd half of year due to ramp up following design wins.
Market share in storage? In enterprise we have a large share and don't expect any change. In consumer new technology will help them gain market share. Only six remaining major hard drive makers, and we already have 60% market share.
Smart phone market share? Existing and new customers are giving new design wins because we have low-power, but high performance application processor. Regaining some customers we lost at transition. Our roadmap is strong. Design win activity is significant.
Working on 10K filing which we will get out soon.
XScale revenue contribution? Baseband is positioned strongly and is doing well. Application processor side is getting good design traction, should ramp in second half of year. Revenue is consistent with expectations. Our bottleneck is field support engineering; we are hiring as fast as we can. In a couple of years we will make this a very profitable business.
XScale manufacturing? Migrating designs into our foundries. Initial samples are very promising. High volume devices will migrate first. New designs are going straight to our foundries. Will see significant cost reductions as this process progresses.
Gross margin model? Still 50% gross margin model, which we are on track to hit.
Video? An important area for us; we are investing heavily. We have the most advanced technology in the market. By some time next year we will have complete end-to-end solutions.
Optical drives? Working with a couple of customers, sampling chips for high-definition.
WiFi 11n? Marvell 11n was chosen as the test bed for all chips on market. Our technologies are considered to be world-class.
65 nm percentage? Just a small percent in 2007.
Gigabit Ethernet client side? Have a strong relationship with Intel. Believe we are holding or gaining share, but it is not a growth market because it has run its course.
HSDPA is integrated on a single chip with XScale processor. Volume shipping before end of year. XScale is fully compatible with ARM instruction set. It has video processing instructions that ARM does not have.
Intel smart phones based on X86? Were aware of these plans before acquired XScale from Intel. It is a different market segment. XScale is truly ultra-low power. X86 is more compatible, but can't do with as little power and will not be appropriate for cell phones.
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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 2007 William P. Meyers