Marvell Technology Group
) reported fourth-quarter fiscal 2013 adjusted earnings per share
(EPS) of 12 cents, surpassing the Zacks Consensus Estimate of 8
cents. However, the quarter's result was 20.7% below the year-ago
level, mostly due to higher expenses. Shares rallied 5.49% in the
after hours, reflecting investor confidence in the quarter's
results and upbeat guidance.
Marvell reported revenues of $775.3 million in the fourth
quarter, up 4.4% from $742.7 million in the year-ago quarter. The
quarter's result came well above the company's guidance range of
$700.0-$740.0 million. The better-than-expected result was mainly
due to increased demand from our mobile, wireless, and storage
customers, offsetting the ongoing macro uncertainty and a
lackluster PC market.
Reported gross margin declined 190 basis points (bps) year over
year to 52.2% due to higher commodity costs and product mix.
Operating margin was 5.6%, down from 9.4% in the year-ago
quarter. Total operating expenses were $360.8 million, up 8.8%
from the year-earlier quarter.
GAAP net income in the quarter was $50.2 million, or 9 cents per
share, compared with $80.7 million, or 13 cents in the year-ago
period. Excluding amortization and restructuring but including
stock-based compensation expenses, net income on non-GAAP basis
was $67.9 million, or 12 cents per share, compared with $95.2
million or 16 cents in the year-earlier period.
Balance Sheet & Cash Flow
Marvell ended the quarter with cash, cash equivalents and
short-term investments of $1.92 billion, down from $2.02 billion
in the prior quarter. Accounts receivable were $330.2 million
compared with $374.8 million in the prior quarter. Inventories
decreased to $250.4 million from $324.0 million in the preceding
quarter. The company carries no long-term debt.
Cash from operating activities was $204.6 million in the fourth
quarter compared with $136.6 million in the prior quarter.
Capital expenditure was $19.1 million. Free cash flow was $161.0
million, which was roughly 20.1% of revenues, up from 14.4% of
revenues in the prior quarter.
During the quarter, Marvell Tech bought back 34.0 million shares
for a total value of $283.0 million. The company also paid $31.7
million toward quarterly cash dividend of 6 cents per common
Fourth Quarter Guidance
After witnessing a difficult 2013, management now expects many of
its investments and key initiatives to pay off in fiscal 2014
across all its end markets.
Marvell provided a weak first-quarter 2014 revenue forecast
citing weakness in the networking market. But the company expects
a boost from the second quarter onwards.
Marvell Tech expects first quarter revenues in the range of
$700.0-$740.0 million, representing a decline of 7.1%
sequentially at the mid-point. In terms of end market, the
company expects mobile and wireless end markets to decrease
mid-to high teens sequentially, mainly due to seasonality in
demand for its wireless connectivity products.
Storage market is expected to decline mid-single digits
sequentially due to seasonality and the Chinese New Year-related
slowdown. SSD business is expected to grow double digits in the
first quarter due to market share gains. The company expects
networking to decline approximately mid-single digits, mainly due
to a weaker demand environment.
Gross margin is projected to be 52.7% (+/- 50 basis points) on a
GAAP basis and 53.0% (+/- 50 bps) on a non-GAAP basis. The
company anticipates operating expenses to be approximately $360.0
million (+/- $10.0 million) on a GAAP basis and $310.0 million
(+/- $10.0 million). Research and development expenses are
estimated at approximately $250.0 million and selling, general
and administrative expenses at approximately $60.0 million.
Marvell expects non-GAAP operating margin of approximately 10.0%
(+/- 1.0%). Net interest (expense)/other income are expected to
be approximately $2.0 million. Non-GAAP tax expense is likely to
be $2.0 million.
The share count is projected at 530 million. Considering the
above-mentioned estimates, non-GAAP EPS is estimated within the
12-16 cents range. GAAP EPS is expected in the range of 2-6
cents. The Zacks Consensus Estimate for the first quarter is 9
Marvell delivered solid fourth-quarter results crushing our
estimates. Revenue contributions from the end markets were
decent. Also, continuous share buybacks were a positive. The
first-quarter guidance though reflects softness, but gives an
overall positive view for the rest of the year.
We remain positive on Marvell's diverse revenue model and stable
balance sheet. However, we remain concerned about stiff
competition in the semiconductor market from major players, such
Texas Instruments Inc.
). We are also concerned about the significant number of pending
lawsuits, higher material costs and the company's European
Currently, Marvell Technology has a Zacks Rank #3 (Hold).
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