Analyst Conference News Summary

conference date: February 21, 2013 @ 1:45 PM Pacific Time
for quarter ending: February 2, 2012 (Q4, fourth quarter fiscal 2013)

Forward-looking statements

Overview: Less than seasonal revenue decrease may indicate a recovery.

Basic data (GAAP) :

Revenue was $775.3 million, down 1% sequentially from $780.9 million, but up 4% from $742.7 million in the year-earler quarter.

Net income of was $50.2 million, down 27% sequentially from $68.8 million and down 38% from $80.7 million year-earlier.

EPS (earnings per share) were $0.09, down 25% sequentially from $0.12 and down 31% from $0.13 year-earlier.

Guidance:

Q1 fiscal 2014 ending May 1, 2013 revenue guidance $700 to $740 million. Gross margin 52.5% to 53.2% GAAP, 52.5% to 53.5% non-Gaap. Operating expenses near $360 million GAAP, $310 million non-GAAP.

EPS GAAP $0.02 to $0.06; non-GAAP $0.12 to $0.16. Expects $25 to $50 million free cash flow.

Expects revenue growth to resume in Q2.

Conference Highlights:

"Fiscal year 2013 was a softer than expected year for Marvell." Share gains in hard drives (HDD) were more than offset by declining shipments in the industry. Networking market was flat and mobile had product transition difficulties. But generated $626 million of annual free cash flow and invested in inititatives that should drive growth this year beginning in fiscal Q2.

In the fourth quarter (Q4) exceeded revenue expectations.

Q4 Non-GAAP numbers: net income $104 million, down sequentially from $113 million, and $127 million year-earlier. EPS $0.19, down sequentially from $0.20 and from $0.21 year-earlier. Gross margin 53.2% up sequentially from 52.3%.

The HDD market saw revenue growth and share gains, particularly in mobile. Storage segment revenue was up 5% sequentially and represented 50% of total revene. Revenue from one leading enterprise HDD OEM doubled in the quarter. Expects HDD share gains going forward. The SSD (solid state device) storage revenue outperformed relative to competitors and was in-line for revenue exectations. SSD revenue up 40% y/y. In fiscal Q1 storage revenue to decrease mid-single digit percentage sequentially, as market share gains are offset by seasonality.

Mobile and wireless demand was better than expected, but was still down 11% sequentially. 23% of overall revenue. Believes gaining with key customers and will return to sustained growth in Q2. Unified 3G platform has just started production shipments. Quad core 3G device is sampling and should start shipments this year. Accelerating LTE introductions. New access point solutions gaining traction.

Network processing segment revenue dropped 1% sequentially but gained market share. 23% of overall revenue. PON and programmable network processors led.

Believes strongly Marvell did not infringe on the CMU patents. Detailed FAQ on website.

Cash flow from operations was $205 million, up seqentially from $137 million. Free cash flow was $161 million. $283 million cash was used to repurchase shares. Dividend of $0.06 was paid with $31.7 million cash. Next $0.06 dividend to be paid on April 4.

Cash and equivalents balance ended at $1.919 billion, down $98 million sequentially. Inventories were down to $250.4 million.

Cost of goods sold was $370.8 million, leaving gross profit of $404.5 million. Operating expenses were $360.8 million, consisting of: $273.7 million research and development; $42.3 million selling and marketing; $32.6 million general and administrative; $12.3 million amortization. Leaving operating income of $43.6 million. Interest income $6.2 million. Slight income tax benefit.

Q4 GAAP gross margin was 52.2%, declining from 54.1% year-earlier.

Q&A:

Confidence in growth resumption in Q2? Q1 is always the seasonal low. Q2 growth will also reflect share gains in storage and new mobile wireless products.

SSD market subsets? SSD is still a tiny part of Marvell's storage business. Prices are declining, which drives volumes, and hybrid market should be a nice source of growth for us. In 2012 about one-third of market was captive, two-thirds was merchant.

3G ramp? Platform is both TD and WCDMA. Same chip can go in tablets and smartphones. The dual and quad-core devices are software compatible, so upgrades are easy. We have a lot of design wins including tier 1 OEMs. By end of Q4 we should achieve our 10% market share goal, but it is a challenging target.

We are committed to keeping op ex flat y/y. We will prioritize R&D dollars.

North American customer exectations? We have very good relations with North American customers, we will be able to serve their future LTE needs. Revenue should recover as we ramp up new programs.

TD revenue should resume growth in Q2, and we expect growth in the high-end TD marke his year.

PON business? The decline was due to a particular customer waiting for government approval of a particular project. We expect PON to do well this year.

BB10 devices including our products are expected to launch later in the year.

Programmable network processors? They are targetted at the very high end like service providers. They are starting to get traction. We also build the low-end devices (which are high performance but not programmable) for datacenters.

Where can HDD share gains come from? Transitions from 320 to 500 G per platter will continue into early 2014. In enterprise segments new products shipping will generate share gains.

Mobile connectivity high end beam-forming 4x4 technology will be in high end set-top boxes, access points, gaming, even ultrabooks. 2x2 will be in lower-cost devices.

LTE mobile devices will result in increased ASPs. They will be less than the prices for the market leader, but higher than older devices.

SSD controllers have long, one to two year lead times between when we develop them and they are ramped by customers. Success in Q4 resulted from products developed much earlier. Our success comes from partnering with top-tier flash OEMs and their success in end markets, not from competitor delays.

Marvell sells both standard ARM based chips and customized ARM chips for the high end.

Seagate notebook HDD penetration? 50%, up from 30% the prior quarter.

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