Analyst Conference Summary

conference date: August 28, 2008 @ 1:45 PM Pacific Time
for quarter ending: August 2, 2008 (2nd quarter fiscal 2009)

Forward-looking statements

Overview: Exceeded high end of prior revenue guidance. But guidance for fiscal Q3 seems conservative.

Basic data (GAAP) :

Revenues were $842.6 million, up 5% sequentially from $804 million and up 28% from $656.7 million year-earlier.

Net income was $71.4 million, up 2% sequentially from $69.9 million, and up from a los of $56.5 million year-earlier.

EPS (earnings per share) were $0.11, flat sequentially and reversing a loss of $0.10 year-earlier.

Guidance:

Fiscal Q3 revenues $860 to $880 million, or 13 to 16% y/y. Approximately 52.5% non-GAAP gross margin. Non-GAAP EPS 0.24 to 0.26. GAAP EPS $0.11 to $0.13.

Conference Highlights:

Better than anticipated results with excellent free cash flow and improved operating efficiency. Reflects our ability to make our customers successful. This is typically the seasonally weakest quarter of the year.

Non-GAAP numbers: net income $154 million or $0.24 EPS, up 288% from $39.7 million year-earlier. Also up 2% sequentially from $150.4 million, which included a one-time benefit of $14.5 million. Gross margin 52.3%, up sequentially from 52% and from 49.4% year-earlier. Non-GAAP numbers exclude amortization of acquired intangibles of $35 million and stock-based compensation of $48 million.

Cash flow from operations was $183 million, up 40% sequentially. Free cash flow was $167 million. Paid down $100 million of debt.

Cost of goods sold (GAAP) was $406 million. Gross profit $437 million. Operating expenses of $358 million included R&D $250 million, selling and marketing $42 million, general and administrative $31 million, and $35 million amortization of intangibles. Leaving operating income of $79.1 million. Interest expense was $2.7 million. Income tax provision $5.1 million.

Cash and equivalents ended at $889 million. Accounts receivable $471 million. Inventory $327 million, down $43 million sequentially. Term loan obligations were $289 million.

Data communication product demand was robust. Gigabit controller demand was good dues to increased use in notebook PCs. Storage products experienced typical seasonal decline in demand, but up over 30% y/y. Quarter was back-end loaded. Launch of key consumer wireless product by an Asian customer was the most significant cause for better than expected revenues. Printer chip products up sequentially and y/y.

Western Digital was only customer exceeding 10% of revenues.

Confident in cellular and mobile market. In quarter ramped into high volumes of 2nd generation 3g processors. 3rd generation products are emerging with doubled performance. As powerful as a mainstream PC with power demand of a cell phone. Best-in-class power consumption, giving us a strong competitive advantage in the smart phone market. We will next move to multicore processors.

Solid state storage efforts are getting interest from customers. Expect this SSD market to expand, but not to replace the hard drive (HDD) market. Oversupply of Flash memory will be taken up by SSDs in the near term. Marvell's advantage is in performance and reliability. Will see significant revenues later this year.

Two agreements in storage business announced. Seagate relationship is expanding. Fujitsu awarded SOIC design for next-generation fast enterprise drive, to begin shipments in Q4. Our superior technology got us this increased business.

Q&A:

Content in SSD controllers? It depends on the target market. Would be lower in low-end market, higher in high-end market.

Fujitsu win? Serial-attached SCSI controller, previously from another supplier.

Operating expenses? Still early to describe opportunities to decrease expenses, but with revenue growing rapidly mainly we aim to keep expenses flat, so margins will grow.

Areas of growth? All segments are growing, but all at a more subdued rate due to broad economic concerns.

Calendar 2009 drivers of revenue growth? Application processors and mobile processors (XScale). We continue to invest in advancing disk drive technology. Optical and power management investments are showing good traction and should start showing in revenue second half of next year.

Any customers with excess inventory? Not that we know of. Customers do not build beyond what they think they can sell.

GPS plans? We are looking into incorporating GPS functionality into a variety our products. Trimble agreement allows us to build GPS at lowest possible cost.

One of your storage customers predicted a 10% increase in Q3? Our trends in storage this year are in line with industry trends. We don't comment on individual customers.

Will you bring stock-options down over time? We value stock options for employee retention and plan to continue them.

Expanded Seagate relationship? Can't give details, but really, really, pleased with Seagate's long-term commitment to Marvell. We have a huge market share of the overall storage business, so a particular customer or line of products does not affect us as much as the overall storage market.

Cellular business down y/y? Feel positive about outlook for 2009. Our new products are doing well, shipping from PSMC instead of Intel fab. 3rd generation design is complete, with full software compatibility. We will get more design wins in 2009. Inventory is in transition this quarter. To early to comment on possible communications processor second customer. Feels very comfortable with relationship to current customer.

Our outlook is influenced by the overall economic outlook; if the economy is not so bad, we could be wrong and our guidance could turn out low. We admit our short term view is cautious.

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