Marvell Technologies Group Ltd.
) has been hit hard by an untoward decision announced by a
federal jury, whereby the company has been ordered to pay a hefty
amount of $1.17 billion as damages. The decision held Marvell
guilty after the jury found the company infringing two patented
technologies of Carnegie Mellon University. The technologies were
being used by Marvell for making chips that are used in hard disk
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Founded in 1900, Pittsburgh-based Carnegie Mellon University
serves as a private research institute. The University conducts
extensive researches in various areas starting from computing to
the arts to the environment to biotechnology.
The patented technologies of CMU have helped Marvell to deliver
high performing chips, which in turn would help HDDs to read data
from high speed magnetic disks, accurately. According to the
jurors, Marvell sold billions of chips incorporating the
infringed technologies. They also mentioned that the damage
amount could triple as Marvell's infringing act was found to be
During the trial, Marvell defended its case by stating that the
company did not use the University's patented technologies and
that the patents were invalid. However, the company officials
remained unavailable for comment after the verdict was announced.
The case was filed before the U.S. District Court for the Western
District of Pennsylvania in March 2009.
Following the news, Marvell shares plunged 10.3% in the day's
trade with another 2.97% fall in the after-hours. No doubt the
shares will remain pressured till the final hearing scheduled in
Marvell has been through tough times for the past few quarters.
Macro-economic slowdown and a lackluster PC market are badly
affecting its chip demand, resulting in weak revenue as well as
But Marvell maintained its share buyback and dividend payout to
value shareholder loyalty. This is affecting both cash balance
and cash from operations adversely.
Given the current situation, it seems obvious that such a huge
damage amount will further jeopardize the chipmaker's upcoming
We are also concerned about stiff competition from major
semiconductor players, such as
Texas Instruments Inc.
Currently, Marvell Technology has a Zacks #4 Rank (Sell).