This summary is based on the second quarter fiscal 2009 earnings call conducted by Marvell Technologies Group Ltd. (MRVL) on August 28, 2008.
Management:
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Chairman, President and CEO: Dr. Sehat Sutardja
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CFO: Clyde R. Hosein
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IR: Jeff Palmer
Key Investors Issues
- Revenues of $843 million were up 28% from $656.7 million in 2007.
- Net income was $154 million or 24 cents a share, up 288% from $39.7 million or 6 cents a share in the prior year.
- The firm generated $183 million in cash from operations.
Second Quarter Highlights
Revenues of $843 million, up 28% from $656.7 million in the prior year reflects an ability to deliver products that meets customers'' needs and enables them to be successful.
- Demand for the datacomm products was robust across the product portfolio, with record sales of the wireless products driven by the launch of one of the customers handheld product lines as well as the continue demand from existing customers.
- The firm experienced a better than anticipated demand for the Gigabit Ethernet controllers, but due impart to the increased demand for notebook PCs.
- Additionally, it continued to see positive fractions for the enterprise switches and system controllers due to the continued bill out of Metro Ethernet networks, primarily within the emerging markers.
Sales of the embedded wireless products were better than anticipated due to the launch of a key consumer product by one of the customers and that continued strength from existing customers.
- The sales of wireless products were up sequentially and upgraded on 75% year-over-year, highlighting the strength and marketing expectance of the low power embedded wireless offerings.
- Sales of the Ethernet products increased both sequentially and on a year-over-year basis better than anticipated but due to the continued build out of metro Ethernet networks within the emerging markets as well as the continued demand for network PCs.
- Sales of enterprise products, that is switches, system controllers and processors was up over 16% on a year-on-year basis.
Sales of cellular declined modestly both sequentially and on a year-over-year basis.
- Demand for the application processors accelerated during the quarter and both the unit and revenue basis as a new series of smartphones from the major agent customer gained market traction.
- Sales of the communication processors were slightly lower than expectation during the quarter, due to some inventory balancing occurring ahead of new product launches at one of the major handset customers.
- Sales of printer products were better than anticipated, especially for ink-based printer systems.
Gross margin was 52.3%, an improvement of 30 basis points sequentially, an increase of over 287 basis points from the same period a year ago and better than the prior guidance of 51% to 52%.
- Overall operating expenses were $279 million, which is slightly better than the prior guidance of $280 million to $285 million and up 3%, reflecting the increases in product specific development costs.
- R&D expenses were $217 million, up $8 million sequentially due to increased product expenses and head count additions in strategic development areas.
Net income was $154 million or 24 cents per diluted share, up 288% from $39.7 million or 6 cents a share in the prior year due to revenue growth.
- Cash equivalents and short-term investments were $889 million, up approximately $115 million sequentially.
- The firm generated $183 million in cash from operations, spent $16 million in CapEx, resulting in $167 million in free cash flow or 20% of revenues.
- Accounts receivable was $471 million, up about $100 million sequentially, primarily due to linearity and timing of customer payments.
- Net inventories were $327 million, down $43 million sequentially as the firm focused on improving its operational efficiency.
- Accounts payable were $237 million, up $69 million sequentially due to the improvement in timing of payments made to suppliers.
Update on several products initiatives:
- The firm began to ramp into high volume production of the second generation PXA-based 3G cellular communication processor.
- Additionally, it experienced positive demand for the application processors used newly in announced high end smartphones from a major Asian customer.
- The company is in the process of migration to the third generation of the mobile processors which extends the broad based, best in class application processor franchise to new and emerging markets.
- These new products will benefit from the improved performance and speed characteristics while taking full advantage of the existing ecosystem and software infrastructure of the legacy XScale architecture.
These processors now have the equivalent integral [ph] computing performance of mainstream laptop PC, yet the power consumption that you would normally find on a smartphone.
- In the storage business, since announcing entry into this market at Computex last quarter, the impress and response from potential customers has been very positive.
- The firm sees the SSD market expanding, but the fear of it replacing the HDD market is vastly exaggerated, because SSD performance will always come at a price premium and there is an over supply of flash memory chips.
- This is primarily due to the end market applications, which are driving today''s flash demand such as MP3 players and digital still cameras.
At the same time, HDD technology will continue to rapidly improve and even own product roadmap has shown that customers will be able to build a terabyte mobile drive within the next couple of years.
