Analyst Conference Summary

conference date: August 19, 2010 @ 1:45 PM Pacific Time
for quarter ending: July 31, 2010 (second quarter fiscal 2011)

Forward-looking statements

Overview: Revenue ramp strong, but less than prior guidance range.

Basic data (GAAP) :

Revenue was $896.5 million, up 5% sequentially from $856 million and up 40% from $640.6 million in the year-earlier quarter.

Net income of was $219.8 million, up 7% sequentially from $205.8 million and up 276% from $58.5 million year-earlier.

EPS (earnings per share) were $0.33, up 10% sequentially from $0.30 and up 267% from $0.09 year-earlier.

Guidance:

4 to 8% sequential revenue growth in fiscal Q3, or 930 to $970 million. 59 to 60% non-GAAP gross margin, 31% operating margin. Non-GAAP EPS $0.41 to $0.44. GAAP EPS about 7 to 9 cents per share lower than non-GAAP.

Conference Highlights:

Non-GAAP net income was $273 million for $0.40 EPS. Stock based compensation excluded was $30.7 million; amortization $21.2 million; restructuring $1.7 million.

Revenue growth in mobile and wireless market was over 50% sequentially and up over 140% y/y. Softening PC market a challenge; supply chain inventory buildup had some effect.

Storage (HDD) end market revenue was 15% down sequentially. There had been supply constraints, and as a result overbuilt inventory preparing for back to school sales. This was largely from Europe economic effect. Believes consumption of excess inventory is mainly behind, as seen in orders towards the end of July. Began production shipments in quarter, ahead of schedule, to a new HDD manufacturer, but first orders are modest. In Q3 believes revenue in this market will be flat, which is below normal seasonality.

Mobile and wireless now represents nearly one-third of revenue, a record. Growth was broad based across lines. About 15% of sequential growth was due to to Armada, with a single customer buying for a game product introduction, 30% due to cell phone processors, again with a single customer ramping a product, 55% of sequential growth was for embedded Wi-Fi. Believes 15 to 20% sequential growth in Q3.

Networking market up a few percent. In Q3 expects flat sequentially.

New product revenue from all segments was $220 million, up 60% sequentially.

A $500 million share repurchase program was authorized.

Gross margin 59.1% GAAP, 59.3% non-GAAP, within guidance. 30.3% non-GAAP operating margin.

Cash flow from operations was $319 million. Free cash flow $292 million. Cash and equivalents balance $2.4 billion, up $1.1 billion y/y.

Cost of goods sold was $366.7 million, leaving gross profit of $529.8 million. R&D espense was $228.2 million; marketing $36.9 million; administrative $25.4 million; amortization $21.2 million. Total operating expenses were $311.7 million. Leaving GAAP operating income of $218.1 million. Interest income was $4 million. Income tax provision $2.5 million.

Inventories increased due to PC/HDD chain issue, but had been trying to build, so about on target for Q3.

Separately, Marvell announced it will acquire DS2 Technology "a supplier of high speed semiconductor solutions for powerline communications."

Q&A:

What are you seeing in the PC market? Our guidance is well below typical seasonality for Q3. We saw improvement in July, are guiding conservatively.

Buy back? We believe the current stock price does not reflect the strength of our business.

Your customers in HDD are guiding to 6% to 8% growth in Q3, why are you guiding flat? We admit to being conservative. Upsides are possible.

Networking clients like Cisco are cautious, how do you see this market? We see the market as flatish for the rest of the year.

Hard drive (HDD) desktop v. notebooks? We see more desktop, but some of our chips can go to either, so it is hard to tell. Some of our chips go into storage accessories, not directly into notebooks.

Price effects of inventory issue? We saw no material impact on ASPs (average prices).

Cell phones, China Mobile? Existing customers are doing well. China Mobile market is doing very well, with numerous customers in final phase of designing new hand sets. Next two quarters will see some of these products in production.

With the new HDD customer, we are on one platform, in about 4 quarters we should be seeing more platforms ramp.

Stength of Marvell model? We saw an opportunity to broaden markets by integrating many technologies on single chips (system on chips, SoC).

Competition with Qualcomm processors, which reviewers saw are faster? Understand the skepticism, despite belief in the excellence of Marvell product. We have two faster processors available already. But gigahertz is not the only issue, our product in use integrates well and works well within the product systems. In actual working situations, our processors work faster.

Video on demand is causing datacenters to need much faster switching devices. We are one of the two companies supplying chips that can do this.

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