Analyst Conference News Summary

conference date: February 19, 2015 @ 1:45 PM Pacific Time
for quarter ending: February 1, 2015 (Q4, fourth quarter fiscal 2015)

Forward-looking statements

Overview: Missed revenue guidance and declined y/y.

Basic data (GAAP) :

Revenue was $857.5 million, down 8% sequentially from $930.1 million, and also 8% from $931.7 million in the year-earlier quarter.

Net income of was $81.7 million, down 29% sequentially from $115.3 million, and down 16% from $97.1 million year-earlier.

EPS (diluted earnings per share) were $0.16, down 27% sequentially from $0.22, and down 16% from $0.19 year-earlier.

Guidance:

For the first fiscal quarter of 2016 revenue range is $810 to $830 million. Diluted GAAP EPS $0.08 to $0.10; non-GAAP $0.17 to $0.19. Expects storage down sequentially; mobile and wireless down slightly; networking up modestly. Expects about $100 million of free cash flow.

Conference Highlights:

Revenue was below guidance, but controlled expenses so EPS was a penny above guidance. Believes will grow on the whole again in fiscal 2016 as mobile SoCs will ramp new customers and platforms.

9% increase in revenue in full fiscal 2015 over 2014. non-GAAP $1.15 EPS.

Non-GAAP numbers: net income $131 million, down 15% sequentially from $155 million, and down 13% from $151 million year-earlier. EPS was $0.25, down 14% sequentially from $0.29, and 14% from $0.29 year-earlier. Excludes non-cash stock-based compensation, amortization, and other non-cash or one-time charges.

Non-GAAP gross margin was 51.8%, up sequentially from 51.0%. Non-GAAP operating margin was 15%. GAAP gross margin was 51.4%, up sequentially from 51.0%.

The HDD market (storage) market revenue was down 4% sequentially, consistent with expectations. Represented 51% of Q4 sales. Remains the top SSD controller vender, up 30% y/y. Storage market expected to have normal seasonal Q1 revenue decline.

Mobile and wireless revenue was down 19% sequentially but up y/y. Represented 24% of total revenue. LTE units grew over 50% sequentially in quarter, while 3G is declining. Seasonally lower on gaining and mobile ASPs. New wireless devices should accelate sales as the year progresses. But expects a slight sequential decline in fiscal Q1. Noted the 4G pricing environment is competitive.

Network processing segment market revenue was sequentially down 3% and below expectations on lower carrier spending. Represented 18% of Q4 sales. But ethernet switching and access points were strong. Awarded a major design win, which will ramp in 2016. Believes will grow sequentially in Q1.

Internet of Things sales are gearing up.

In the quarter Marvell launched a variety of new products in the Armada family, SSD controllers, powerline connectivity and Wi-Fi.

Cash and equivalents balance ended at $2.5 billion, up $130 million sequentially from $2.4 billion. Cash flow from operations was $155 million. Free cash flow was $135 million. $20 million was spent on share repurchases. The dividend required approximately $31 million.

Cost of goods sold was $417.1 million, leaving gross profit of $440.3 million. Operating expenses were $360.5 million, consisting of: $285.5 million research and development; $37.2 million selling and marketing; $34.7 million general and administrative; $3.1 million amortization. Leaving operating income of $79.8 million. Interest and other income was $4.4 million. $2.5 million income tax expense.

The quarterly dividend per share will remain at $0.06, payable on April 2, 2015 to shareholders of record on March 12, 2015.

Q&A:

Baseband LTE pricing details? LTE is taking off, but is a highly competitive market. Quad core device prices are declining, but out octo-core chip is gaining design wins. We are bullish about gaining market share.

LTE vs. 3G going forward? We are driving LTE to the max. We did see a continued 3G down ramp, but may be at its tail end. Moving forward it will be mostly LTE after the current quarter.

At what point do you look at strategic alternatives for the highly competitive mobile business? Our competitors are reacting into the LTE business. It shows our technology is world-class. They are reacting with prices to try to scare us off. Of course we have to manage our expenses. Marvell will consider anything that makes sense for shareholders, but we are not offering this business. Some of our developing technology will completely differentiate us from the rest of the world. We are becoming a real threat to many of the players in this market.

What about LTE margins? We have a strong 4G roadmap. Customers like our carrier aggregation technology. What is missing is the turnkey solution, which will give us higher growth and margins. By the end of Q1 we will sample the turnkey solution to customers.

Wi-Fi part of wireless business? We have 100% attachment rate for Wi-Fi on handsets. We are strong in enterprise Wi-Fi. We are strong in supporting gaming devices, including Microsoft and Sony, as well as wireless TV solutions. We are the de facto standard for Chromebooks. Wi-Fi is also important for IoT.

Guiding to down 14% for Q1, how do you get back to annual growth? We have two chips coming into the LTE space that will ramp mobile significantly.

All the LTE chips we produce now are 64 bit. We don't want to play in the the last-generation space. Even 64 bit pricing has become aggressive.

Did SSD decline sequentially in the quarter? It was seasonally weak in Q4. We continue to see share gains.

In enterprise networking we have differentiating technology, better power to speed ratio, that is amazing customers. It takes time for them to get new products into production. These are carrier grade systems. They can buy 3 chips from our competitors at 100 watts each, or they can get the same capability on one chip from us with much lower power consumption. We believe we can capture the majority of designs coming up in the next 18 months or so.

What drove the 50% sequential LTE revenue increase? It was across the board for all customers. No particular geography or customer. The opportunity in 2015 is global, not just in China.

Prediction of seasonally down HDD vs. some predicting lower than usual PC sales? We feel comfortable, we are very close to our hard drive customers.

Seagate and Micron announcement? They are both customers of ours. We work closely with them for SSDs.

For the full fiscal year 2016, we expect networking revenue to grow faster than in fiscal 2015.

We have a design center in China, so we are seen as a local supplier in China.

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

Search

More Analyst Conference Pages: