Marvell Technology Group
) reported third-quarter fiscal 2014 adjusted earnings (including
stock-based compensation but excluding amortization, acquisition,
restructuring and legal related expenses) of 24 cents per share
which beat the Zacks Consensus Estimate of 17 cents per share. On
a year-over-year basis, earnings per share improved 62.5%
primarily due to higher revenues and margin expansion.
Marvell reported revenues of $931.2 million in the third
quarter, up 19.3% year over year, and surpassed the Zacks
Consensus Estimate of $871.0 million. The quarter's revenues also
came ahead of management's guidance range of $850.0
By end market, Storage revenues increased 16.0% from the
year-ago quarter due to strength in solid state drives (SSDs) and
hard disk drive (HDD) business. Networking revenues decreased 3%
on a sequential basis due to soft demand from enterprise network
Mobile and Wireless end markets increased 63% sequentially due
to device launches by Marvell's customers and higher number of
unit shipments of W-CDMA and TD-SCDMA 3G products.
Marvell's adjusted gross margins dropped 258 basis points
(bps) on a year-over-year basis to 50.1%. On a year-over-year
basis, the company witnessed a 114 bps expansion in its adjusted
operating margins primarily due to lower operating expenses as a
percentage of revenues (down 371 bps).
Marvell's adjusted net margins (including stock-based
compensation but excluding amortization, acquisition,
restructuring and legal related expenses) expanded 233 bps on a
year-over-year basis to 12.9%.
Marvell ended the quarter with cash, cash equivalents and
short-term investments of $1.80 billion compared to $1.73 billion
in the previous quarter. The company generated $177.2 million
cash from operating activities and had free cash flow of $157.0
million. The company carries no long-term debt.
During the quarter, Marvell bought back shares worth $71.5
million and paid dividends of $29.5 million.
Marvell expects fourth-quarter revenues in the range of $880.0
million-$920.0 million, a sequential decline of 3%. In terms of
end market, the company expects mobile and wireless end markets
to decline in low single-digits sequentially due to seasonal
declines in non-mobile connectivity.
Revenues from Storage are expected to decrease in low-to-mid
single digits due to seasonality. The company expects networking
to decline in low single-digits.
Management expects non-GAAP gross margin to be 50.0% (+/-100
bps) for the forthcoming quarter while non-GAAP operating
expenses are expected to be $315.0 million (+/-$10 million). The
company expects non-GAAP earnings per share to be 25 cents (+/- 2
Marvell delivered decent third-quarter results which came
ahead of the Zacks Consensus Estimate. Revenue contributions from
the end markets were in line with the expectations. Also,
continuous share buybacks were a positive. However, the company's
fourth-quarter revenue forecast was tepid due to seasonality
Nonetheless, 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 as
Texas Instruments Inc.
). Sluggish macroeconomic conditions coupled with higher material
costs and the company's European exposure are the near-term
Currently, Marvell Technology has a Zacks Rank #3 (Hold).
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