Analyst Conference News Summary

conference date: August 18, 2011 @ 1:45 PM Pacific Time
for quarter ending: July 30, 2011 (second quarter fiscal 2012)

Forward-looking statements

Overview: Revenue above mid-range of guidance, non-GAAP EPS above guidance. A strong quarter against the macro background.

Basic data (GAAP) :

Revenue was $897.5 million, up 12% sequentially from $802.4 million but about flat from $896.5 million in the year-earlier quarter.

Net income of was $192.4 million, up 31% sequentially from $146.9 million but down 12% from $219.8 million year-earlier.

EPS (earnings per share) were $0.31, up 41% sequentially from $0.22, but down 6% from $0.33 year-earlier.

Guidance:

Q3 revenue $940 to $980 million. Mobile & wireless up double digits, network high single digits, storage flat. Non-GAAP gross margin about 57%. At midrange 26% non-GAAP operating margin. Non-GAAP EPS $0.39 to $0.43. GAAP EPS about $0.07 lower than non-GAAP.

Conference Highlights:

Revenue ramp was led by Mobile and Wireless end market's 18% sequential growth. All markets showed solid revenue growth. Marvell is executing well on all its new product initiatives, which should result in gaining market share.

Non-GAAP numbers: net income $234 million, up sequentially from $189 million, but down from $273 million year-earlier; EPS $0.38. Gross margin 58.1%, down sequentially from 58.5% and from 59.3% year-earlier. Operating margin 26%.

Mobile and Wireless market increased 18% sequentially and represented about 26% of total revenue. Revenue from TD mobile (TD-SCDMA) technology for Chinese smartphones is ramping. Marvell has the only one-chip solution for TD phones in China, which cost only $100, unsubsidized. Over 20 TD smartphones are now available from OEMs, including ZTE, Motorola, Huawei, and Samsung. Expects double digit sequential growth again in the current quarter. Continues to develop the TD roadmap. Wireless connectivity solutions showed seasonal growth. Largest existing mobile customer (RIM) business has stabilized. Expects to launch multiple consumer Android based handsets in Europe and South America.

Networking end market revenue was up 3% sequentially and represented about 20% of total revenue. Seeing strong growth for new consumer optical networking technology (PON, passive optical network) in Asia. Making share gains in this end market.

Storage hdd saw 7% sequential growth, about 50% of total revenue. Gained shares at Hitachi mobile drives. Believes will benefit from OEM consolidation. Chips for mobile 500 GByte per platter drives are shipping at 4 of 5 customers. Enterprise hdd next generation design is sampling chips, with a ramp in 2012. SSD (solid state drive) progress has been significant. Sees excellent long-term storage segment growth, but flat this quarter due to a transition at a particular customer.

Cash and equivalents balance ended at $2.40 billion, up sequentially from $2.27 billion. Inventories increased to $322 million. Cash flow from operations was $263 million. Free cash flow was $235 million. Repurchased $136 million, or 9 million shares, in the quarter.

Cost of goods sold was $378.1 million, leaving gross profit of $519.4 million. Operating expense of $324.8 million included: R&D $249.6 million; selling and marketing $40.4 million; general and administrative $23.6 million; amortization of acquired intangible assets $11.1 million. Interest and other income was $2.1 million. Income tax provision was $4.3 million.

R&D expense was up to prepare for launches of new products. Non-cash stock-based compensation expense was $30 million.

Increased gold prices has hit margins by about 1.5%. Is transitioning to copper, but that will take time.

Q&A:

Any direct impact from macroeconomic issues, linearity in quarter? We see some impact in our storage end market. We would normally see higher PC growth in the December quarter. There is a lot of apprehension at customers. Our linearity was better than in previous years. Three years ago people were caught by surprise. We do not have a credit bubble now.

In 2012, mobile opportunities? We don't see RIM becoming irrelevant, despite current headwinds. We are no longer dependent on any single customer in this space. TD smartphones are doing well, and we expect Android phones out later in the year.

TD smartphone sell through, as opposed to sales into channels? The unprecedented low price, possible because of our single chip solution, is causing end customer demand to increase rapidly. More devices are qualifying.

10 gigabit ethernet is still small volume compared to 1 gigabit. We recently introduced a high port count 10 gigabit single chip switch. New optical systems from Marvell are being deployed by Google in China. Copper is on its way out.

Vizio tablet launch through Costco? It is still early, the price point is attractive, initial reaction is good.

Visibility, backlog? Visibility reflects customer apprehension about economy. Backlog is about where it has been historically. Q3 seasonality is positive for printers, PCs, etc. New products coming to market could offset tendency for Q4 to be weaker than Q3.

Cash use? We have a very strong balance sheet. We could partake in all three: buy backs, dividends (looking at), and acquisitions.

TD cell phones as percent of China Mobile sales? Just a small percentage today. A lot will depend on the consumption rates in China. New channels will open up in China in the next few months. It is hard, however, to predict a penetration rate. China Mobile has 550 million subscribers. The smartphones could cost only $70 next year.

Storage inventory? Channel inventory appears to be in pretty good shape.

Wi-Fi? Our products are mainly in printers, cameras, and games. So there is seasonality, with the main builds is summer.

Android handset price points, your content in them? Price points are up to OEMs. We do well with high volume, lower price point smartphones. Initial deployment would not be in the U.S., but in Europe, Asia, and South America. Not all products have the same chips.

SSD market top customers? We are working with all of the large flash manufacturers. The market for SSDs, as opposed to tablet Flash memory, is quite small. The new thin notebooks will have SSDs. That ramp is a few quarters away.

We have sampled LTE based wireless chips for the China Mobile market.

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