Marvell Technology Group
) 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
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
). 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
) TV and MS Kinect (a motion sensing input device from
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.
), 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.
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
Texas Instruments Inc.
). 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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