Avian Securities is out this morning reiterating their positive opinion on Marvell Tech (MRVL), specifically putting into perspective some of the fears with regard to Research In Motion (RIMM). Also they are once again outlining where they believe there is upside to their and street numbers, and why MRVL remains one of their favorite ideas.
Amtech is out indicating this morning that Freescale Semiconductor (FSL) has displaced MRVL in its 2.5G "Javelin" product due out mid '09. While Avian is still trying to confirm whether MRVL won or lost this socket, they would note that the Javelin product appears to be a lower end, lower cost, product aimed at less advanced networks. Losing such a socket to a lower end FSL product would not be as significant for MRVL which is focusing on higher end portion of the smart phone market and where MRVL is strongly entrenched within RIMM.
In the next few months, RIMM has 3 updates scheduled kicking off with the "Bold", followed by "Thunder", and "Kickstart". They believe the Bold is positioned as RIMM's primary offering for enterprise users and expect 3G capabilities to expand RIMM's traction in Europe.
Avian expects the touch screen Thunder (available in both CDMA and GSM versions) to target the high end consumer market with 3G capabilities again making this offering more attractive to European consumers than RIMM's previous portfolio.
Finally, they see the Kickstart flip phone launching with an extremely attractive price point and targeting the lower end of the consumer market, previously an area where Marvell has not had significant traction. This diversification of RIMM's product portfolio should 1) create significant growth opportunities for Marvell at RIMM, 2) increase MRVL's ASP per part due to the ramp of 3G based products, while 3) mitigating the loss of any single design.
Thus, while Marvell may have lost the "Javelin" product, (note: speculation around potential design losses at RIMM has weighed on the name in varying degrees since they picked up coverage of Marvell in 2007 with the current speculation already having already helped cause nearly a 10% decline), the impact is far less significant than it might have been a year ago as RIMM's product portfolio has become far more segmented than it had been previously, particularly with Javelin likely appealing primarily to customers of carriers that have been slow to roll-out 3G capable networks (e.g. T-Mobile). Finally, with MRVL dominating RIMM's visible roadmap for 3G devices, Avian believes that the company is well positioned to continue as a significant supplier to RIMM moving forward.
In the near-term, they continue to see a number of growth drivers beyond the new RIMM phones that should drive upside beyond the seasonal 2nd half pickup. These include Seagate's adoption of MRVL SOCs, Microsoft's (MSFT) forthcoming Xbox update, ramp of new MRVL SSD controllers, and lastly increased traction for MRVL controllers in home server type solutions. In particular with regards to these NAS controllers, they believe this segment is becoming a meaningful portion of revenues for MRVL, and given the market growth rates (high double digit last year) will have a meaningful impact on our model as we shift to breaking out this product portfolio moving forward. The firm remains positive on MRVL given both the variety of upcoming catalysts as well as MRVL's attractive valuation (trading at approximately a 25% discount to growth on an earnings basis).
Notablecalls: Good coverage on MRVL by Avian Securities.