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Q4 Preview: Will Marvell (MRVL) Investors Say 'Thanks for the Memory' This Quarter?

Marvell Technology Group Ltd. (Nasdaq: MRVL) is trading slightly lower today, ahead of the company's fourth quarter earnings release, expected out after the market closes today. Shares are down just0.3%.

MRVL is expected to report EPS of $0.42 on revs of $925.64 million. Last quarter, the Santa Clara, CA-based chipmaker reported EPS of $0.45 on revs of $959 million, both topping consensus estimates. Looking back at Q409, Marvell produced EPS of $0.40, ex-items, on revs of $843 million, versus the consensus EPS of $0.37 and revs of $840.89 million.

Shares lost 2.6% in the quarter, to $19.01 at the end of January. The stock is 5.5% lower since then, and finished 2010 about 11.8% lower.

A simple valuation has Marvell with a forward P/E of 10.6x FY12 EPS estimates,, compared to 12.1x for STMicro ( STM ) and 13.1x for Texas Instruments ( TXN ).

Data from Bloomberg has 27 analysts with a Buy on MRVL, 11 with a hold, and none suggesting to Sell. The analyst price target average is $23.30, with a high of $29 and low of $18. Shares have traded in a range of $22.87 - $13.87 over the last 52-weeks.

Summary

Marvell guided to a Q4 adjusted EPS of $0.40 - $0.44 with sales of $900 - $950 million during their third quarter conference call.

  • Goldman Sachs is recommending to avoid the stock into earnings on potential downside stemming from Q111 guidance. They see a solid report out of the company, with EPS of $0.39 on revs of $939.9 million, but are looking for Q111 EPS of $0.31 on revs of $881.3 million. Q111 weakness will be driven by ongoing weakness in HDDs, according to Goldman.

    Lower gaming console sales in the quarter will affect embedded WiFi sales, and be more pronounced considering Marvell's increased market share in the segment.

    Goldman is Neutral on the shares, with a price target of $22.

  • Deutsche Bank is looking for EPS of $0.41 on revs of $926 million. DB notes that "while key handset customer [Research In Motion (Nasdaq: RIMM)] units are strong internationally, we believe these are mostly older generation Blackberry's not yet using the latest MRVL silicon."

    Looking ahead, DB expects Q111 revs of $903 million and EPS of $0.37. They say that seasonal softness in HDDs and Mobile/Wireless, combined with excess network-related inventory, have investors nervous into the quarter.

    DB has a Buy on the company, with price target of $25.

  • Janney Capital Markets thinks that HDD trends struggled into the close of the quarter. The firm is looking for EPS of $0.40 on revs of $900 million. On the quarter, Janney comments: "we believe HDD was down around 5%, networking was flattish, and consumer was down slightly more than 10% on a sequential basis. With storage initially guided flat, we believe additional inventory work-down offset normal positive seasonality and market share gain in notebooks at Hitachi. In networking, we believe inventory headwinds on the enterprise side offset switching share gains. With respect to mobile/wireless, following several quarters of stellar growth, post holiday seasonality drove shipments lower QoQ."

    Janney sees negative pressure on the top-line coming from storage and Mobile/Wireless end markets. "We assume HDD SoC shipments will be down in the mid-single digit range QoQ. With networking flattish and mobile/wireless down seasonally, we now look for MRVL [Q111] sales to be down mid-to-high single digits." The firm is looking for Q111 EPS of $0.32 on revs of $840 million.

    Janney has a Buy rating, and $27 fair value target on the stock.

  • D.A. Davidson expects EPS of $0.42 with revs of $923.7 million. DD notes recent results from Hewlett-Packard ( HPQ ) point to decent strength in the PC market. "Marvell also has the opportunity to see its HDD unit market share increase from 60% currently to ~70% as programs ramp with Hitachi ( HIT ) and later Seagate ( STX )."

    DAD notes that Marvell could also see upside as the primary chip supplier for the Microsoft (Nasdaq: MSFT) Kinect, as sales of 8 million in 2010 easily topped the consensus of 5 million units.

    D.A. Davidson has a Buy on the shares, and $26 price target.

Most analysts will be looking at Q111 rather than Q410 numbers, it seems. Overall expectations for flat guidance may provide investors with upside on a positive surprise, and potential downside to in-line or lower outlook.

Marvell is expected to release their Q410 earnings on Thursday, March 3, 2011, at approximately 4:00pm EST. Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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