This summary is based on the fourth quarter fiscal 2009 earnings call conducted by Marvell Technology Group Ltd. (MRVL) on March 5, 2009.
Management:
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President and Chief Executive Officer: Dr. Sehat Sutardja
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Chief Financial Officer and Interim Chief Operating Officer: Clyde R. Hosein
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Senior Director, Investor Relations: Jeff Palmer
Key Investors Issues
- Revenues of $513 million were down 39% drop from $845 million in the prior year.
- Net income was $32 million or 5 cents per share, down 74% from $123 million or 20 cents per diluted share reported in the year-ago period on weak revenues.
Full Year Highlights:
- Revenue was $2.95 billion, a 2% increase over the $2.89 billion reported for fiscal 2008.
- Net income was $482 million or 76 cents per diluted share, an improvement of 72% as compared to the $280 million or $0.44 per diluted share reported in 2008.
Fourth Quarter Highlights
The firm reported revenues of $513 million reflecting a 39% drop from $845 million in the prior year due to the severe impact of the unprecedented industry wide erosion in end-market demand.
- From an end market perspective nearly 75% of the revenue shortfall versus the original expectation was due to erosion in the PC end market.
- Approximately 15% due to consumer products including embedded wireless, handset and mobility related products.
- Another about 10% due to enterprise networking products.
- Western Digital was the only customer exceeding 10% of revenues.
Gross margin was 51.3% with the sequential decline in gross margin primarily due to lower revenues offset by improvements in spending.
- Overall expenses were $235 million which was significantly better than the previously projected range of $255-265 million.
- Aggressive actions taken include to reduce expenses including cancellation of bonuses, headcount reductions, salary freezes, consolidation of certain of facilities and reductions in discretionary spending.
- R&D expenses for the quarter were $178 million, down approximately $26 million or 13% sequentially and down $19 million from the same period a year ago.
SG&A expenses were $57 million, down approximately $6 million or 9% sequentially and a decrease of about 36% from the same period a year ago.
- This resulted in operating margin of approximately 5%, down from the approximately 19% reported in the prior quarter and the 12% reported in the same period a year ago.
- Net interest expense and other income was an expense of about $440,000, a decline of $15 million.
- Net income was $32 million or 5 cents per share, down 74% from $123 million or 20 cents per diluted share reported in the year-ago period on weak revenues.
Cash flow from operations was approximately $680 million as compared to the $177 million reported for fiscal 2008.
- Free cash flow was $607 million representing a 21% free cash flow margin, an improvement of about 850% from the $64 million reported in 2008.
- Cash, cash equivalents and short-term investments were $952 million, down approximately $93 million sequentially.
- The firm fully retired its term loan, paid down the remaining balance of approximately $192 million.
- Accounts receivable were $222 million, down about $176 million sequentially primarily due to lower revenues and accounts payable was $139 million, down $85 million sequentially due to lower processing volumes combined with the timing of payments made to suppliers.
Strategic Insights:
- It continues to focus on those areas of the business it can directly control, influence or positively impact.
- Additional measures to realign the business with the current and the anticipated economic environment include the reduction of approximately 15% of our worldwide workforce.
- In addition to the headcount reductions it also implemented other significant corporate wide initiatives to lower costs and expenses.
- Despite the challenging economic climate, management believes the time is right for Marvell to be very proactive in streamlining the business and sees the semiconductor industry in the midst of revolutionary changes.
There is an accelerating trend towards architectural conversions in events system on chip designs and Marvell is uniquely positioned to take advantage of this convergence.
- From a high level perspective the trends it sees in the specifications for next generation devices is the need to integrate multiple high performance, low power embedded CPU’s.
- This also includes support for events, 3D graphics, support for wired and wireless communications standards and lastly a shift towards [POM] standard based performance interfaces.
- The lynchpin to success in high performance, low power application processors in addition to proven 3G base band technology, integrated graphics, HDTV and complete platform devices including power management and multi-radio wireless connectivity.
Fiscal 2010 Outlook:
- The firm currently projects its first quarter revenues in the range of $419-530 million, down 4% to up 3% sequentially.
- It currently anticipates operating expenses to be approximately $235 million plus or minus $5 million.
- EPS is expected to be in the range of $0.03 to $0.05 profit per share.
Key questions and answers from the fourth quarter earnings call conducted by Marvell Technology Group Ltd. (MRVL) on March 5, 2009.
