Analyst Conference News Summary

conference date: May 23, 2013 @ 1:45 PM Pacific Time
for quarter ending: May 4, 2013 (Q1, first quarter fiscal 2014)

Forward-looking statements

Overview: Solid revenues in high end of guidance range, but no blockbuster and down y/y.

Basic data (GAAP) :

Revenue was $734.4 million, down 5% sequentially from $775.3 million, and 8% down from $796.4 million in the year-earlier quarter.

Net income of was $53.2 million, up 6% sequentially from $50.2 million, but down 44% from $94.5 million year-earlier.

EPS (earnings per share) were $0.11, up 22% sequentially from $0.09 but down 31% from $0.16 year-earlier.

Guidance:

Fiscal Q2 revenue between $770 and $810 million. GAAP gross margin near 52.2%. Non-GAAP gross margin near 52.5%. GAAP EPS $0.07 to $0.11. Non-GAAP EPS $0.17 to $0.21. $100 million in free cash flow.

Conference Highlights:

Demand was better than seasonally normal, while market share gains came in storage and networking end markets. "Starting in the second quarter of fiscal 2014, we expect many of our investments and key initiatives across all our end markets to produce tangible results," said CEO Sehat Sutardja. More specifically, we expect growth to be driven by increased traction in areas such as mobile handsets, tablets, connectivity and SSDs."

Non-GAAP numbers: net income $98 million, down 6% sequentially from $104 million. EPS $0.19, flat sequentially from $0.19, but down 17% from $0.23 year-earlier. Gross margin 54.6%, up sequentially from 53.2%. Excludes $34 million in stock based compensation expense.

The HDD market (storage) did better than expected. Believes need for consumer and business storage is seen as continuing to grow. Revenue was flat sequentially and represented 53% of total sales. OEMs continue to adopt Marvell's technology. Gained 5% of market share last year and expects continuing share gain this year. SSD business growth was in double digits sequentially. Helping customers migrate to hybrid devices, but will take time. Expect storage market near flat sequentially in Q2, with SSD growth offset by HDD decline.

Mobile and wireless market results were slightly below expectations. Down 24% sequentially. Was 18% of overall sales. Believes that was a trough and partly related to a North American customer. Multiple tier 1 OEMs are adopting MRVL 3G and 4G platforms. Initial quad-core 3G chips are now shipping. LTE solutions are being certified and should see first device on market before the end of the year. Also winning slots with combo solutions in tablets and ultrabooks. Multiple new gaming consoles will contain Marvell connectivity solutions. Expects double digit growth in Q2.

Network processing segment revenue. Down 2% sequentially as gaining share from peers. 24% of total revenue. Q2 growth low-to mid single digits sequentially.

Cash and equivalents balance ended at $1.73 billion. Cash flow from operations was $84 million. Free cash flow was $53 million. $200 million was spent on share repurchases. The dividend required approximately $30 million. Inventory was ramped to meet expected demand in Q2.

Cost of goods sold was $335.4 million, leaving gross profit of $398.9 million. Operating expenses were $356.1 million, consisting of: $279.1 million research and development; $40.0 million selling and marketing; $26.3 million general and administrative; $10.7 million amortization. Leaving operating income of $42.9 million. Interest income $3.2 million. $7.2 million income tax benefit.

Long term non-GAAP gross margin range is 50% to 55%. Mobile and wireless gross margins tend to be lower than other segments.

Q&A:

PC market in second half of 2013, growing or shrinking? We are two-steps removed from PC OEMs. Our customers are seeing increased HDD use in non-PC applications.

Mobile and wireless improvement by type? Same device is used for smartphones and tablets. Our smartphone solutions are in tablet class for performance.

TD and WCDMA devices for 3G? Single platform supports both formats, and both devices will be in production. We are putting a lot of focus in this area, we expect measurable improvement by the end of the year. We are focused on top OEM tier.

Operating expense going forward? We believe we can keep Op Ex at the current level. Our expenses have been high compared to revenue because we have been investing in new technologies like 64-bit ARM, which is a 2014 and after story. We are prioritizing our R&D dollars on technologies that will matter in the next few years. But we are now reaping benefits of past investments.

10% mobile and wireless target? Sticking with that target, but always said it was a high target. We have the right technology, but we have to strive for the market share. LTE will become the standard for delivering data.

We are investing in 10 gig ethernet over copper, we believe if we can lower the price it will become more popular.

SSD market development? We believe SSDs will have an increasingly important role in ultra-thin laptops. But will take time to become significant compared to HDDs because cost 10x per gigabyte. Reduced Flash prices will drive increased SSD growth. Also believes HDD growth will continue for the next few years as PC prices drop.

Are you working with 3-D NAND yet? We are aware of it, believe will be in production some time next year.

We will continue to be active with share buy backs in Q2, opportunistically.

Communications market infrastructure growth is generally expected by industry in second half of year, but we don't know the specifics yet, or what it would mean for our demand.

Reason for guidance to slight drop in HDD? Most customers guided to flat or slightly down. Enterprise gains are coming slowly, and there are also pricing declines.

Prices for SSD controllers? SSD has bigger die sizes and lower volume, so prices are higher than HDD controllers. That may change as volumes change. We are anticipating 3-bit per cell; it is ready for this already.

CMU litigation timing? Post trial motions were heard in the first week of May. We are waiting for the rulings.

Any traction in the new North American platform smartphone? We should see some traction early next year.

OpenIcon Analyst Conference Summaries Main Page
Marvell Investor Relations page
Openicon Marvell main page

Search

More Analyst Conference Pages: