Earnings Preview: Marvell Technology

| About: Marvell Technology (MRVL)

Marvell Technology (NASDAQ:MRVL) is expected to report Q4 earnings after the market close on Thursday, February 23, with a conference call scheduled for 4:45 pm ET.

Guidance

The consensus estimate is 18c for EPS and $740.3M for revenue, according to First Call. On Jan. 27, Marvell cut its Q4 revenue view to $735M-$745M, citing a later-than anticipated recovery in hard disk drive, or HDD, shortages. Severe flooding in Thailand hurt production of the drives, and Marvell's biggest HDD customer -- Western Digital (NYSE:WDC) -- was one of the worst-hit companies. Recent commentary from Dell (NASDAQ:DELL) underscores the ongoing challenges in HDDs. In addition, Marvell experienced year-end demand softness at its mobile and wireless customers, particularly in China.

Analyst Views

Citigroup says that given the pre-announcement's proximity to the quarter-end, the firm anticipates Marvell will report results will be largely in-line with its revised outlook. Marvell enjoyed the benefit of a strong ramp in TD-SCDMA smartphone sales in 3Q12. However, it eventually became evident that the strength was partially attributable to double-ordering, Citigroup says. TD-SCDMA sales contributed to the shortfall in 4Q12. The firm anticipates flattish progression in 1Q13, reflecting the on-going inventory management by TD-SCDMA customers. At this stage, Citigroup does not attribute any shortfall to share loss, although we continue to monitor progress by Spreadtrum (NASDAQ:SPRD) and MediaTek. Citigroup believes Marvell as in cyclical recovery mode. Given the severity of the HDD issue, the firm suspects consensus may not be modeling the slope of recovery aggressively enough. Citigroup rates Marvell a Buy, and encourages investors to buy shares on any pullback. Consensus for Q1: 19c on $767.74M in revenue. Consensus for 2012: $1.24 on $3.39B in revenue.