Marvell: You're Simply Marvelous

Shares in networking chip vendor Marvell Technology  (MRVL)  are surging on the back of a very strong earnings report.  As Tiernan Ray reported:

Sales rose 27% year-over-year to $804 million in its fiscal first quarter ending May 3, beating an average estimate of $784 million. The company’s net income per diluted share of 24 cents, excluding some costs, was almost five times as high as the year-earlier period, and well ahead of estimates of 13 cents per share. Including costs for stock-based-compensation, among other things, profit was 11 cents a share. The company cited stronger than expected sales of “802.11N” wireless router chips, chips for networked disk drives, and printer chips among the sources of higher-than-expected revenue in the quarter. Cost-cutting initiatives helped Marvell boost its gross profit as a percentage of sales to 52%, above the company’s 50% target.

In a December post my colleague Zack Miller wrote:

It’s definitely a stock with hair on it. But after taking a recent haircut, it may be an interesting, albeit drawn-out, play.

And how right he was. It seems that the company’s ambitious turnaround plan has taken hold and we are starting to see the results. Improving margins, the aforementioned launch of the 3G Blackberry, new products and cost cutting all could possibly help the stock get back on track.

 

As IOI wrote a few months ago, the fact that the former hi-flier came crashing down to earth, potentially made for an attractive entry point for the stock. I don’t want to toot our own horn, but with Miller’s December call, and our February post, it’s nice to be right occasionally!

 

If you are a long-term investor, looking to find a battered tech name that has the potential to make a turnaround, do some research on Marvell.

Disclosure: The author’s fund holds a position in MRVL. He has no position in any other stock mentioned as of May 30, 2008.