Marvell Technology Group
) has reported first quarter fiscal 2013 adjusted earnings per
share (EPS) of 18 cents, beating the Zacks Consensus Estimate of 16
cents. However, EPS was 24.6% below the year-ago level, mostly due
to lower revenue and higher expenses.
Marvell reported revenues of $796.4 million in the first
quarter, down 0.8% from $802.4 million in the year-ago quarter. The
reported revenue surpassed the Zacks Consensus Estimate of $769.0
Revenues from the
mobile and wireless
end market grew 14.0% from the year-ago quarter, but fell 1.0% from
the prior quarter. The segment contributed 29.0% to the total
revenue. Revenues from the
end market increased 20.0% from the prior quarter, mainly due to
hard disk drive demand recovery post Thai floods. Marvell also
witnessed a 1.0% sequential drop in its revenues from the
Reported gross margin declined 430 basis points (bps) year over
year to 54.0% due to higher commodity costs and foundry prices.
Operating margin decreased 670 bps year over year to 11.8%. Total
operating expenses were $336.1 million, up 5.1% from the
earlier-year quarter. Higher operating expenses reflect continued
investments in relation to product launches.
GAAP net income in the quarter was $94.5 million, or 16 cents
per share, compared to $146.9 million, or 22 cents in the year-ago
period. Excluding amortization and restructuring but including
stock-based compensation expenses, net income on non-GAAP basis was
$111.5 million, or 18 cents per share, compared to $161.8 million,
or 24 cents in the year-earlier period.
Balance Sheet & Cash Flow
Marvell ended the quarter with cash, cash equivalents and
short-term investments of $2.20 billion, down from $2.25 billion in
the prior quarter. Accounts receivables were $417.4 million,
compared to $407.3 million in the prior quarter. Inventories
decreased to $353.4 million from $354.1 million in the preceding
quarter. The company carries no long-term debt.
Cash from operating activities was $198.7 million in the first
quarter, compared to $69.1 million in the prior quarter. Capital
expenditure was $18.9 million. Free cash flow was $178.0 million,
which was roughly 22.4% of revenue, up from a mere 5.0% of revenue
in the prior quarter.
Share Buyback & Dividend
During the quarter, Marvell Tech bought back 15.0 million shares
for a total value of $223.0 million. With this, Marvell has
repurchased approximately $1.7 billion of its previously authorized
$2.0 billion program. During the first quarter, the board approved
an additional $500.0 million under the authorization. Now, with the
addition, the remaining shares under the current repurchase program
come to $848.0 million.
Considering its cash position, Marvell decided to return
shareholder value through dividend payment. The first regular
quarterly cash dividend of 6 cents per common shares will be paid
in July 2012.
Second Quarter Guidance
Marvell Tech expects second quarter revenue to grow 6-12.0%
sequentially to a range of $840.0 to $890.0 million. By end market,
the company expects mobile and wireless end market to increase in
the mid to high single-digit range sequentially, with growth driven
by over 20% sequential growth in TD smartphone revenue and positive
seasonality in connectivity.
Networking end market is expected to improve in the mid
single-digit range sequentially. While, storage end market is
expected to increase between 10% and 15% sequentially, with an
estimated 50.0% growth in the 500-gigabyte TD-mobile revenue.
Non-GAAP gross margin is projected in the range of 54.0% to
55.0%. The company anticipates non-GAAP operating expenses to be
approximately $305.0 million, plus or minus $5 million. Research
and development expenses are estimated at approximately $235.0
million and selling, general and administrative expenses at
approximately $60 million. Marvell expects operating margin of
approximately 19% (+/- 1.0%). Net interest expense and other income
are expected to be an approximately $2 million benefit. Non-GAAP
tax expense will be $2.0 million.
The diluted share count is projected at 602 million. Considering
all the above, non-GAAP EPS is estimated roughly at 28 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 23 cents.
The quarter's results were impressive with Marvell's top and
bottom lines beating the Zacks Consensus Estimates. Revenue
contributions from all the end markets were modest. But continuous
share buybacks were the quarter's positives. The second quarter
guidance reflects signs of improving TD-Mobile business. We are
also pleased with the improving demand situation in China and new
We see that China Mobile is continually increasing its
investments in TD-SCDMA and TD LTE. Given that Marvell has a strong
product line-up in both of these technologies, we believe the
company will be able to take advantage of this expected growth.
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.
). 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 #4 Rank, implying a
short-term Sell recommendation.
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