Earnings Preview: Marvell Tech - Analyst Blog

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Marvell Technology Group ( MRVL ) is scheduled to announce its first quarter fiscal 2013 results on May 17, 2012 after the market closes, and we see no revision in analyst estimates at this point of time.

Fourth Quarter Overview

Marvell Technology delivered a mediocre fourth quarter 2012 with its bottom line beating the Zacks Consensus Estimate by 4 cents, but top line missing. The quarter's EPS was 55.3% below the year-ago level, mostly due to lower revenue and higher expenses.

Revenue declined year over year but was on par with the company's expectations. Overall results were affected by macro uncertainties, natural calamities (earthquake in Japan and massive floods in Thailand), lackluster mobile business in China and product transitions at one of Marvell's largest customers.

Higher commodity costs and foundry prices, as well as investments in product launches led to margin contraction.

Despite the weak results, management was upbeat about its existing and newly launched products, which are competitive enough to benefit from the revival in demand.

First Quarter Guidance

Marvel expects an improvement in each of the end markets in fiscal 2013 based on post-flood recovery and improving China TD business, SSD and networking businesses. Marvell also expects the mobile and wireless end market to decline by high single digits. Considering the factors, the company expects first quarter 2013 revenue to be flat to up 6% sequentially.

Non-GAAP EPS is estimated roughly at 20 cents (+/- 2 cents). GAAP EPS is expected to be lower than the non-GAAP estimate by about 7 cents (+/-1 cent). The Zacks Consensus Estimate for the first quarter is 16 cents.

Agreement of Analysts

According to the analysts, Marvell is well positioned to increase its share at Hitachi Ltd. and Seagate Technologies ( STX ). They expect the design wins with these two companies to become a material revenue driver for Marvell over the coming years.

Analysts believe that there are growth opportunities in solid state drive (SSD) controllers, China TD/HSPA basebands, combo chips for handsets and game consoles, and application processors in Google ( GOOG ) TV and MS Kinect (a motion sensing input device from Microsoft [ MSFT ]).

Marvell has launched new SSD controllers, which can be used in Ultrabooks. Growing demand for next-gen laptops or ultrabooks is a reason to cheer for as Marvell could collect huge orders and drive revenue growth, moving forward.

Moreover, the analysts have positive expectations for the second half of calendar 2012. They are also optimistic on the company's aggressive share buyback plans, but lackluster demand and a potential supply cut at its major customer, Research In Motion Ltd. ( RIMM ), keep them cautious.

Out of the 13 analysts providing estimates for the first quarter and fiscal 2013, none made any revision in the past 7 days. This indicates that the analysts are positive but are maintaining their estimates till the improvements become visible.

Magnitude of Estimate Revisions

We observed no movement in the Zacks Consensus Estimate for the first quarter and fiscal 2013 in the past 30 days. However, in the last 90 days, the Zacks Consensus Estimates for the first quarter and fiscal 2013 increased from 14 cents and 99 cents to 16 cents and $1.02, respectively.

The upside in our estimates indicates Marvell's affirmative guidance and improvements in its core businesses.

Recommendation

Marvell Technology's strong execution and exposure to the booming mobile computing market or tablets are encouraging. But we remain apprehensive about stiff competition in the semiconductor market from major players such as Intel Corp. ( INTC ), Texas Instruments Inc. ( TXN ) and LSI Corp. ( LSI ). A significant number of pending lawsuits and the company's European exposure also concern us.

Currently, Marvell Technology has a Zacks #3 Rank, implying a short-term Hold recommendation.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: GOOG , INTC , LSI , MRVL , SSD

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