MRVL

Marvell Technology Group Ltd. (MRVL)

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Marvell Technology Group (MRVL)

Q4 2012 Earnings Call

February 23, 2012 4:45 pm ET

Executives

Sukhi Nagesh - Vice President of Investor Relations

Sehat Sutardja - Co-Founder, Executive Chairman, Chief Executive Officer, President, Chief Executive Officer of Marvell Semiconductor Inc, President of Marvell Semiconductor Inc and Director of Marvell Semiconductor Inc

Clyde R. Hosein - Chief Financial Officer, Principal Accounting Officer and Secretary

Analysts

Sanjay Devgan - Morgan Stanley, Research Division

John Pitzer - Crédit Suisse AG, Research Division

Glen Yeung - Citigroup Inc, Research Division

Uche X. Orji - UBS Investment Bank, Research Division

Harlan Sur - JP Morgan Chase & Co, Research Division

Bobby Gujavarty - Deutsche Bank AG, Research Division

Doug Freedman - RBC Capital Markets, LLC, Research Division

Srini Pajjuri - Credit Agricole Securities (USA) Inc., Research Division

James Schneider - Goldman Sachs Group Inc., Research Division

Mark Lipacis - Jefferies & Company, Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter Fiscal 2012 Marvell Technology Group Ltd. Earnings Conference Call. My name is Jeff, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Sukhi Nagesh, Vice President, Investor Relations. And you have the floor, sir.

Sukhi Nagesh

Thank you, Jeff and good afternoon, everyone. Welcome to Marvell Technology Group's Fourth Quarter and Full Year Fiscal 2012 Earnings Call. I'm Sukhi Nagesh, Vice President of Investor Relations. And with me on the call today are Sehat Sutardja, Marvell's CEO; and Clyde Hosein, Marvell's CFO. We will all be available during the Q&A portion of the call today. If you have not obtained a copy of our current press release, it can be found at our company website under the Investor Relations section at marvell.com. Additionally, this call is being recorded and will be available for replay from our website.

Please be reminded that today's discussion will include forward-looking statements that involve risks and uncertainties that could cause our results to differ materially from management's current expectations. The risks and uncertainties include our expectations about sales of new and existing products, including statements about our TD, W-CDMA PON, HDD and SSD products, statements about general trends in the end markets we serve, growth opportunities, impact of the flooding in Thailand, statements regarding our financial predictions for the first quarter of fiscal 2013 and our expectations for long-term growth.

To fully understand the risk and uncertainties that may cause results to differ from our expectations and outlook, please refer to today's earnings release, our latest quarterly report on Form 10-Q and subsequent SEC filings for a detailed description of our business and associated risk. Please be reminded that all of our statements are made as of today, and Marvell undertakes no obligation to revise or update publicly any forward-looking statements.

During our call today, we will make reference to certain non-GAAP financial measures, which exclude the effect of stock-based compensation, amortization of acquired intangible assets, acquisition-related costs, restructuring costs and certain onetime expenses and benefits that are driven primarily by discreet events that management does not consider to be directly related to our core operating performance.

Pursuant to Regulation G, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our fourth fiscal quarter and full year 2012 earnings prese release, which has been furnished to the SEC on Form 8-K and is available on our website in the Investor Relations section.

With that, I would now like to turn the call over to Sehat.

Sehat Sutardja

Thanks, Sukhi, and good afternoon, everyone. Today, we reported fourth quarter revenues of approximately $743 million, reflecting a 22% sequential decrease from the prior quarter. The sequential decline was driven largely by lower HDD volumes on account of the Thailand floods, seasonality and softer demand for our Mobile & Wireless products, particularly in China.

For the quarter, we delivered the following non-GAAP results: gross margin of 54.5%, operating margin of 16% and earnings per share of $0.21. In addition and consistent with our plan to return value to our shareholders, we continue to repurchase our shares. In Q4, we repurchased about 13.5 million shares for a total of approximately $186 million. Fiscal 2012 was a challenging one for the industry and for Marvell in particular. We endured product transitions at one of our largest customer, the Japan earthquake during the early part of the year and cloud-related disruptions in the later part of the year.

These challenges created a perfect storm for us. We estimate these effects on our full year revenues to be about 10%. In spite of these effects, we continue to invest in new product initiatives and ended the year with revenues of $3.4 billion, non-GAAP EPS of $1.27 and free cash flow of $670 million or 20% of revenues. Over the last 6 quarters, we repurchased and retired approximately 93 million or about 14% of our shares and returning $1.4 billion to our shareholders.

Before I go to our end market results, I would like to also take a moment and highlight some of the new initiatives that we introduced recently. At CES, we announced the ARMADA 1500 application processor, which has been designed into the next generation Google TV and other applications such as set-top boxes. We are proud of this accomplishment and this design win is a testament to our core capability in developing highly integrated application processors, with the highest performing ARM-based multicore CPUs that is ideal for viewing multiple high-definition videos.

Read the rest of this transcript for free on seekingalpha.com