Earnings Preview: Marvell Technology

| About: Marvell Technology (MRVL)

Marvell Technology (NASDAQ:MRVL) is expected to report Q1 earnings after the market close on Thursday, May 17, with a conference call scheduled for 4:45 pm ET.


The consensus estimate is 20c for EPS and $768.69M for revenue, according to First Call. The whisper number for Q1 is 24c. Marvell delivered a mediocre Q4, with its bottom line beating the consensus, but top line missing. Revenue declined year-over-year in Q4 but was on par with the company's expectations. Overall results were affected by macro uncertainties, the earthquake in Japan and massive floods in Thailand, lackluster mobile business in China and product transitions at one of Marvell's largest customers. Higher commodity costs and foundry prices, as well as investments in product launches, led to margin contraction. Despite the weak Q4 results, management was upbeat about its existing and newly launched products, which are competitive enough to benefit from the revival in demand.

Marvell expects an improvement in each of the end markets in FY13 based on post-flood recovery and improving China TD business, SSD and networking businesses. Marvell also expects the mobile and wireless end market to decline by high single digits. Taking this all into account, management's guidance for Q1 calls for adjusted EPS 20c, plus or minus 2c. Revenue in Q1 is expected to be flat to up 6% sequentially. Free cash flow for Q1 is seen at about $120M. Lastly, the Q1 adjusted gross margin guidance is 54.5%, plus or minus 50bps and the Q1 adjusted operating expense seen at approximately $295M, plus or minus $5M. Marvell management sees a high-single digit decline in mobile, wireless in Q1. Credit Suisse expects Marvell to post in-line results and guide the JulQ above Street on continued HDD recovery and sequential growth in Mobile/Wireless. The firm views the negative reaction following Seagate (NASDAQ:STX)/Western Digital (NYSE:WDC) reports as more to do with ASP/margin expectations for HDD vendors and not a demand issue.