Analyst Conference Summary

conference date: March 3, 2011 @ 1:45 PM Pacific Time
for quarter ending: January 29, 2011 (fourth quarter fiscal 2011)

Forward-looking statements

Overview: Revenue came in at low end of prior guidance due to seasonal declines in the mobile and wireless end markets. Expanded share repurchase program to $1 billion. Revenue not expected to ramp again until Q2.

Basic data (GAAP) :

Revenue was $900.5 million, down 6% sequentially from $959.3 million, but up 7% from $842.5 million year-earlier.

Net income of was $222.9 million, down 13% sequentially from $255.7 million, but up 9% from $204.8 million year-earlier.

EPS (earnings per share) were $0.33, down 13% sequentially from $0.38, but up 6% from $0.31 year-earlier.

Guidance:

Q1 fiscal 2012 $800 to $850 revenue. Storage down, Network flat, mobile and wireless down 20% due to Marvell holding inventory for a major client and shift to a lower tier phones that Marvell does not support. R&D expense will increase. Non-GAAP EPS $0.30 plus or minus up to 2 cents. GAAP EPS lower by about 6 cents. $120 million free cash flow.

Conference Highlights:

Fiscal year 2011 revenues were up 29% from 2010, but Q4 was hit by declines in mobile and wireless markets. "We are well positioned with competitive products to take advantage of the trends in the coming years."

GAAP gross margin was 58.7%, down both sequentially from 59.3% and from 59.7% year-earlier.

Non-GAAP gross margin was 59.4%, also down slightly. Non-GAAP net income was $273 million, EPS was

Cash flow from operations was $251 million, down sequentially from $368 million and $281 y/y from million. Free cash flow was $213 million. Cash and equivalents ended at $2.93 billion, inventories at $245.4 million. $68 million of cash was from share purchases by employees.

Share repurchase program increased from $500 million to $1 billion. As of February 28, 2011, $150 million of this had been used for repurchases.

18% of total revenues were from networking end market, flat sequentially, as inventory issues are over. Expect Q1 to be flat in what is normally a seasonally down quarter. Armada XP processor adoption in networking space should accelerate in 2011.

44% of revenue was from storage controllers. Declined slightly sequentially due to lower than expected PC industry growth rate. 2010 was a tough year for the hard drive industry. For Q1 expect challenge to continue. February was slow, but expects a pickup in March and April, but still a sequential decline for quarter. Gaining market share in HDD market. Solid state drive controller business is growing. Also introducing a hybrid SSD/HDD controller.

34% of revenues was mobile and wireless, including cell phones, slight sequential decline. One customer (RIM) had a shift to 2.5G, which slowed sales in the quarter because Marvell did not have a 2.5G product, but creates a new market opportunity for entry-level smartphones in developing countries. In Q1 expect a 20% sequential decline mainly due to seasonality and an inventory issue. In 2010 revenue in this segment doubled. Working with more than a dozen Chinese partners to introduce new Marvell based smartphones this year. MIMO Wi-Fi 8797 solution introduced for next generation smart phones.

Expenses in the quarter were up significantly to prepare for 2011 product launches.

Cost of goods sold was $371.8 million, leaving gross profit of $528.7 million. Operating expenses were $313.0 millin, consisting of: R&D $231.8 million, selling and marketing $40.4 million, general and administration $26.7 million and $14.0 million for amortization. Leaving operating income of $215.7 million. Interest income was $10.5 million. Income tax provision $3.3 million. Non-cash stock based compensation included was $31.3 million.

Lower guidance for fiscal Q1 is not due to losing any slots in smartphones, but due to one large customer shifting to lower-end products and inventory changes.

Expects exceptional growth starting in Q2 due to new product introductions.

Q&A:

Weaker mobile outlook? We expect some growth in Q1, don't want to supply specifics.

In fiscal 2011 our revenues increased 29%, our expenses grew more slowly. We invest for the long term, looking past short term revenue issues. Increases in Q1 will help with revenue growth in Q2 and later in the year. Smartphones in particular require a lot of investment ahead of introductions. We have dozens of design wins, we will see design wins as we go through the year. That requires a lot of support, protocol stacks, all the software, Android ports, Kinoma ports, etc.

Hitachi is one of the new large HDD customers. We are working with them, providing multiple chips for multiple new devices. As usual, will take time to ramp up new devices, which are higher capacity than the old drives.

Mobile wireless seasonality versus single customer issue? They are interconnected. We do expect the end market to grow. We do have solutions for the 2.5 G market, so our absense should be just a short term issue.

Storage lack of growth? Dollar numbers were down, but units were up, just not as much as in the past. Part of it is the spend shift to smartphones, tablets, and SSDs.

July quarter visibility? Not from backorders, from seasonality and ramping of new products. Gaming systems in particular are seasonally strong in Q2 and Q3. We are confident that the Chinese phones will start shipping in the next quarter or so, we have handled the devices and they are in the final qualification stage. We are building inventory for this ramp.

RIM non-CDMA share? We are a big supplier to RIM, which is part of moving to the inventory hub model. That and the 2.5 G in developing nations explains the changes.

We dominate in storage for PCs, so the slowdown there was not something we could avoid. When you look at the new products you will see why we are confident Q4 and Q1 should not be the basis of judgement: look to the full 2010 gains and to what will happen in Q2 and Q3.

oPhones sold slowly last year because of high price points. The ones that will ramp this year will still be high end smartphones, but the retail price will be under $200, so they should sell in much higher volumes in China. There have been some challenges, some delays were due to changes in the Android platform. We had once customer announce last Friday, so sales have started, the China opportunity is real.

SSD market growth will depend on lower prices for SSDs.

How much of the RIM 20% loss comes back over next two quarters? It should come back over the next (not current, but Q2 and Q3) two quarters.

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