Marvell Technology (MRVL) makes semiconductor chips for hard disk drives, cell phones, networking and other devices. They have long dominated the HDD market, but have struggled in the smartphone market. In their second quarter of fiscal 2011 (Q2), ending July 30th, we probably saw an inflection point for smartphones based on Marvell chips. This space should be closely watched in Q3 and Q4.
Marvell's stock price is still at bargain levels, at about 10x non-GAAP trailing earnings. Partly this is due to macroeconomic fears affecting the entire market, but more particularly Marvell fell off a recent 52-week high of $21.89 on January 18 due to poor results in Q4 of 2010 and Q1 of 2011, when revenues fell to $802 million, which was down 6% y/y. A few weeks ago it hit $11.94; Friday it closed at $12.89.
That period of weakness was partly due to slower than expected sales of chips for hard drives (HDD) and networking, but most visibly was due to slow sales of chips for RIM's Blackberries. Given that Marvell execs have talked for years about conquering the smartphone market as they once conquered the HDD market, this led many analysts to conclude that Marvell was simply out of the race to provide CPUs for smartphones.
The smartphone chip market is certainly extremely competitive, perhaps the most competitive semiconductor segment today. Marvell has been competing in the U.S. against the likes of Qualcomm (leader in CDMA technology), nVIDIA, Texas Instruments, Samsung, and Apple, which makes its own ARM-based phone CPUs. They have spent years and vast sums of money on R&D, essentially subsiding smartphone chip development with profits from their HDD chips. In the U.S. smartphone market, except for being in a couple of BlackBerry designs and sometimes supplying non-CPU chips for phones (for Bluetooth and Wi-Fi), they have been an also-ran.
Meanwhile, Marvell produced the only one-chip solution for the Chinese communication standard called TD-SCDMA. China Mobile, the largest Chinese wireless company (600 million customers), invested vast sums to develop a TD-SCDMA network, now in place in most Chinese cities. Marvell has worked closely with Chinese companies on this project, bringing about 1000 engineers to the table. Also called OPhones, these smartphones run software on top of Android. Marvell is now referring to them as TD phones. The first generation of TD phones, released in 2010, were expensive and did not sell in large numbers. Essentially they tested the system.
Q2 2011 was when TD smartphones first shipped in sufficient numbers to be meaningful for Marvell investors. Over 20 models are available from manufacturers like ZTE, Motorola, Huawei, and Samsung. TD smartphone revenue roughly doubled in Q2, causing Marvell's wireless segment revenues to increase 18% in the quarter. For Q3 double digit revenue growth for TD smartphone chips is the expectation. Marvell is also sampling solutions for the LTE smartphone market in China. Again, expect fierce competition, but Marvell should win a share of Chinese LTE slots in 2012.
Meanwhile HDD revenue may be sluggish due to the slow PC growth rate, but it generates a lot of cash. Cash flow from operations in Q2 was $263 million. Free cash flow was $235 million. Cash and equivalents balance ended at $2.40 billion, up sequentially from $2.27 billion. Marvell repurchased $136 million, or 9 million shares, in the quarter and has authorized $1.5 billion for further repurchases.
The best cure for the low stock price, to my ears, was hearing that one use for cash could be starting to pay dividends. Compare Marvell's PE ratio to a semiconductor company like Microchip (MCHP) that does pay dividends, and you can see that semiconductor investors are more interested in dividends than they were a few years ago. However, it would be a big change for Marvell, so don't count on it.
Disclaimer: I am a long-term investor in Marvell stock
See also:
http://www.marvell.com/
My August 18, 2011 Marvell (MRVL) analyst call summary
My May 26, 2011 Marvell (MRVL) analyst call summary
My March 2011 Marvell (MRVL) analyst call summary
Keep diversified!
Showing posts with label oPhone. Show all posts
Showing posts with label oPhone. Show all posts
Sunday, August 28, 2011
Monday, May 30, 2011
Marvell Technology Sees Higher Q2
Marvell Technology (MRVL) makes semiconductor chips for hard disk drives, cell phones, networking and telecommunications. Recently the going has been rough for Marvell stockholders, as reflected in its stock price. After a high of $22.87 in April 2010, the stock hit a 52-week low at $13.87. After the Marvell analyst conference call, on Friday the stock jumped 11%, from the Thursday May 26 close of $14.56 to the Friday close of $16.17. So is that it for Marvell, or are we starting a new ramp?
Marvell's management described the results for Q1 fiscal 2012 ending April 30, 2011 as a low point in their cycle. Partly this was the usual seasonality as consumer end products build in Q2s and Q3s. But it also reflected poor sales to RIM for Blackberry models, a slow growth rate in the hard disk drive market, and slow new product ramps. In each case Marvell makes one or more mixed digital and analog chips for the end products.
Revenue for Q1 was $802.4 million, down 11% sequentially from $900.5 million and also down 6% from $855.6 million in the year-earlier quarter. Revenue was at the very low end of guidance. I think the stock had been shorted on the theory they would actually miss guidance, and they did miss Street estimates.
However, Marvell reported that things are already picking up in Q2 and the long-promised Marvell Inflection Point may finally make an appearance in Q3. Q2 revenues are now expected between $870 to $910 million, with non-GAAP EPS of about $0.37, which would support a stock price far higher than Friday's close.
The change in fortunes has several factors. Marvell is leading (or certainly one of the top 2 leaders) in the Solid State Drive market, which is ramping pretty nicely as prices drop and people see the advantages of SSDs. It is also a leader in chips for high-end networks. In the smartphone market we know the competition is intense, but Marvell providing the core chips for the Chinese TD-SCDMA standard based OPhone market. While OPhones started to be available in 2010, they are expected to ramp quickly as 2011 progresses. We are talking potentially 600 million OPhone customers, which makes the fight over American market share seem like a global side show.
Marvell is also sampling solutions for the LTE smartphone market. Again, expect fierce competition, but Marvell should win a share of slots in 2012.
I own Marvell stock and understand the risk of competing against the talented people at other semiconductor companies.
See also:
http://www.marvell.com/
My May 26, 2011 Marvell (MRVL) analyst call summary
My March 2011 Marvell (MRVL) analyst call summary
Saturday, May 14, 2011
NVIDIA Explains Smartphone and GPU Strategies
The NVIDIA (NVDA) analyst call on Thursday was characterized by a relatively short presentation and long question and answer session. Analysts pressed a variety of concerns while management explained their view of the technology space and their strategy for increasing revenue and profits. [See also call details at Nvidia Q1 fiscal 2012 analyst call news summary.]
The explaining was necessary because revenues were $962.0 million, up 8.5% sequentially from $886.4 million, but down 4% from $1.002 billion in the year-earlier quarter. GAAP net income was $135.2 million, down 21% sequentially from $171.7 million, and down 2% from $137.6 million year-earlier. GAAP EPS (earnings per share) were $0.22, down 24% sequentially from $0.29, and down 4% from $0.23 year-earlier. Those numbers include a $40 million payment from Intel for intellectual property (really, to keep NVIDIA a strong ally against AMD); take that out, and the y/y comparisons look worse, while Q1 last year was nothing to shout about either.
So what are the issues? NVIDIA is exiting the motherboard chip set business, which originally became necessary because of a dispute with Intel. AMD has cut heavily into NVIDIA's former dominance in the discrete GPU (graphics) chip and card business. NVIDIA's supercomputer graphics business actually shrank a bit, though management argued it would expand down the road.
That leaves the savior of the moment, Tegra, a chip that runs cell phones and tablets. The newest one is Tegra 2, which everyone admits is a big improvement over the original Tegra. Tegra chips generated $122 million in the quarter, which is a lot of money, until you compare it with losses from the humble chip set business, or the bulk of NVIDIA's revenue, or smartphone chip revenue of some competitors.
NVIDIA claims they are going to take market share in the discrete graphics chips for notebook computers segment. Their only real competitor, AMD, says the same thing. But the good thing about discrete GPU chip competition is there are just those two players. The competition between them is intense, but at least it is somewhat predictable.
In smartphones and tablet computers, however, almost everyone is licensing the core processor design from ARM and adding graphics, Wi-Fi, and cellular modems as best they can. The competition is multifold. Qualcomm was the pack leader two years ago, and still outsells NVIDIA heavily. TI is very competive and believes it now is closer to the heart of Google (maker of the Android smartphone operating system) than NVIDIA, 2010's sweetheart. Apple makes its own ARM based processor for the iPhone and iPad. If they all disappeared there would be Marvell, which dominates the hard drive chip sector and has slots in a number of phones, including the new OPhones in China. There are other players in Korea, Japan, and China. Then there are the non-ARM entries, mainly for tablets but eventually for smartphones, from AMD and Intel.
And anyone can license the intellectual property to make a smartphone chip. In other words, there could be more players in 2012, not less.
Which is too many players. Consolidation will take place, probaby around 2013 when smartphones have completed replacing the bulk of not-so-smart cell phones. While the competition so far has been on technology, with points for speed, usability, and low-power consumption, at some point price will become an important issue. Profit margins will be squeezed.
I certainly believe NVIDIA is as competitive as any of the other companies I named. But there are going to be losers. There will have to be losers. It is next to impossible to predict who they will be.
Given that, investors might want to think about going lower down the food chain, to the companies that make semiconductor manufacturing equipment like Applied Materials or printed circuit boards for smartphones like TTM Technologies.
Of the companies named above, I currently own stock in Applied Materials, TTM Technologies, Marvell, and AMD. In the past I owned stock in NVIDIA.
See also NVIDIA
Keep diversified!
The explaining was necessary because revenues were $962.0 million, up 8.5% sequentially from $886.4 million, but down 4% from $1.002 billion in the year-earlier quarter. GAAP net income was $135.2 million, down 21% sequentially from $171.7 million, and down 2% from $137.6 million year-earlier. GAAP EPS (earnings per share) were $0.22, down 24% sequentially from $0.29, and down 4% from $0.23 year-earlier. Those numbers include a $40 million payment from Intel for intellectual property (really, to keep NVIDIA a strong ally against AMD); take that out, and the y/y comparisons look worse, while Q1 last year was nothing to shout about either.
So what are the issues? NVIDIA is exiting the motherboard chip set business, which originally became necessary because of a dispute with Intel. AMD has cut heavily into NVIDIA's former dominance in the discrete GPU (graphics) chip and card business. NVIDIA's supercomputer graphics business actually shrank a bit, though management argued it would expand down the road.
That leaves the savior of the moment, Tegra, a chip that runs cell phones and tablets. The newest one is Tegra 2, which everyone admits is a big improvement over the original Tegra. Tegra chips generated $122 million in the quarter, which is a lot of money, until you compare it with losses from the humble chip set business, or the bulk of NVIDIA's revenue, or smartphone chip revenue of some competitors.
NVIDIA claims they are going to take market share in the discrete graphics chips for notebook computers segment. Their only real competitor, AMD, says the same thing. But the good thing about discrete GPU chip competition is there are just those two players. The competition between them is intense, but at least it is somewhat predictable.
In smartphones and tablet computers, however, almost everyone is licensing the core processor design from ARM and adding graphics, Wi-Fi, and cellular modems as best they can. The competition is multifold. Qualcomm was the pack leader two years ago, and still outsells NVIDIA heavily. TI is very competive and believes it now is closer to the heart of Google (maker of the Android smartphone operating system) than NVIDIA, 2010's sweetheart. Apple makes its own ARM based processor for the iPhone and iPad. If they all disappeared there would be Marvell, which dominates the hard drive chip sector and has slots in a number of phones, including the new OPhones in China. There are other players in Korea, Japan, and China. Then there are the non-ARM entries, mainly for tablets but eventually for smartphones, from AMD and Intel.
And anyone can license the intellectual property to make a smartphone chip. In other words, there could be more players in 2012, not less.
Which is too many players. Consolidation will take place, probaby around 2013 when smartphones have completed replacing the bulk of not-so-smart cell phones. While the competition so far has been on technology, with points for speed, usability, and low-power consumption, at some point price will become an important issue. Profit margins will be squeezed.
I certainly believe NVIDIA is as competitive as any of the other companies I named. But there are going to be losers. There will have to be losers. It is next to impossible to predict who they will be.
Given that, investors might want to think about going lower down the food chain, to the companies that make semiconductor manufacturing equipment like Applied Materials or printed circuit boards for smartphones like TTM Technologies.
Of the companies named above, I currently own stock in Applied Materials, TTM Technologies, Marvell, and AMD. In the past I owned stock in NVIDIA.
See also NVIDIA
Keep diversified!
Tuesday, March 8, 2011
Marvell Technology: What Inflection Point?
Marvell Technology (MRVL) makes semiconductor chips for hard disk drives, cell phones, networking and telecommunications. Although for the most part Marvell has had a brilliant run since it was founded in 1995, recently the going has been rough, as reflected in its stock price. After a 52-week high of $22.87 last April, the stock closed at $15.81 yesterday, then bounced back a bit today. The release of quarter results on Thursday (the 3rd) and the analyst conference call caused a big sell off Friday, to $16.13, after closing Thursday at $18.22.
Should Marvell be abandoned, or is this a buying opportunity?
First, keep in mind that Marvell has a fiscal year that ends on January 30th. Their Q4s are typically seasonally slower than their Q3s because shipments of chips going into devices sold over the holidays typically are made in Q3. Q1 fiscal 2012 will end at the end of April; Q2 at the end of July; Q3 at the end of October.
On the other hand, a technology company with rapidly ramping revenues can sometimes overcome seasonal declines. Marvell has lined up two sequential q/q declines. In Q2 revenues were $896.5 million; in Q3 $959.3 million; in Q4 $900.5 million; and for Q1 guidance is for $800 to $850 million. That is worse than normal seasonality.
Last year Marvell CEO Sehat Sutardja, at the Marvell March 4, 2010 analyst conference call, predicted that Marvell would reach an "upward inflection point" within the next twelve months. We seem to be in a downward deflection point instead. Now Mr. Sutardja is saying that revenues (and profits) will ramp again in the second half of this year (more precisely, the second half of fiscal 2012). Should we discount his prediction, given he made it before and reality proved him wrong?
Let's look at why the prior inflection point prediction went awry. The hard drive market was not as robust as expected, mainly because global PC sales did not grow much in 2010. Marvell already has more than half of the market for the controller and other chips in hard drives, and in the latest quarter those still accounted for almost half of Marvell's revenue. Even with new products ramping up, the decline in hard drive chip revenue put a big dent in projections. Marvell is competitive in controllers for solid state drives too, but is not dominant there.
The other problem was Research in Motion (RIM), although Sehat did not mention them by name, everyone knew which customer he was talking about. It isn't that RIM (maker of Blackberry phones) is itself in trouble, despite competition from Apple and Android-based devices. Marvell makes chips for only a couple of RIM models. For those models there was an inventory issue, not with too much inventory, but with a change that results in Marvell holding inventory for RIM. The main issue is that in many developing nations RIM is moving 2.5G phones, and Marvell does not have a chip for 2.5G. However, Marvell should have such a chip later this year.
So two major sources of revenue Marvell counted on were down in Q4 and will continue to be down in Q1. But the big issue, the lack of an inflection point, has to do with OPhones in China. These phones sold slowly late in 2010. Sehat believes that is mainly a matter of introducing them and prices that were too high on the original models. During 2011 a number of Marvell based OPhones will be introduced in China at far more attractive prices, yet which maintain Marvell's own profit margins.
Hence, still an upward inflection point. I don't blame potential Marvell investors to take a wait and see approach. The problem (with not buying at today's stock price) is that Marvell, even in these "bad" quarters, is generating a lot of cash. The low price/earnings ratio for the stock reflects the "show me" attitude about OPhones. If you wait for the revenue ramp to be in the rear-view mirror, the stock is going to be a lot more expensive.
So watch for OPhone news out of China. Maybe consumers there will want iPhones or other alternatives instead. But if hundreds of millions buy the new Marvell-based OPhones, Sehat and crew are going to look a lot more far-sighted than they do right now.
I own Marvell stock and understand the risk of competing against the talented people at Qualcomm, NVIDIA, Apple, etc. Right now I would not sell my Marvell stock for less than $30 per share. Come this fall, depending on the OPhone ramp, I may need to change my estimate of its value.
See also:
http://www.marvell.com/
My March 2011 Marvell (MRVL) analyst call summary
Should Marvell be abandoned, or is this a buying opportunity?
First, keep in mind that Marvell has a fiscal year that ends on January 30th. Their Q4s are typically seasonally slower than their Q3s because shipments of chips going into devices sold over the holidays typically are made in Q3. Q1 fiscal 2012 will end at the end of April; Q2 at the end of July; Q3 at the end of October.
On the other hand, a technology company with rapidly ramping revenues can sometimes overcome seasonal declines. Marvell has lined up two sequential q/q declines. In Q2 revenues were $896.5 million; in Q3 $959.3 million; in Q4 $900.5 million; and for Q1 guidance is for $800 to $850 million. That is worse than normal seasonality.
Last year Marvell CEO Sehat Sutardja, at the Marvell March 4, 2010 analyst conference call, predicted that Marvell would reach an "upward inflection point" within the next twelve months. We seem to be in a downward deflection point instead. Now Mr. Sutardja is saying that revenues (and profits) will ramp again in the second half of this year (more precisely, the second half of fiscal 2012). Should we discount his prediction, given he made it before and reality proved him wrong?
Let's look at why the prior inflection point prediction went awry. The hard drive market was not as robust as expected, mainly because global PC sales did not grow much in 2010. Marvell already has more than half of the market for the controller and other chips in hard drives, and in the latest quarter those still accounted for almost half of Marvell's revenue. Even with new products ramping up, the decline in hard drive chip revenue put a big dent in projections. Marvell is competitive in controllers for solid state drives too, but is not dominant there.
The other problem was Research in Motion (RIM), although Sehat did not mention them by name, everyone knew which customer he was talking about. It isn't that RIM (maker of Blackberry phones) is itself in trouble, despite competition from Apple and Android-based devices. Marvell makes chips for only a couple of RIM models. For those models there was an inventory issue, not with too much inventory, but with a change that results in Marvell holding inventory for RIM. The main issue is that in many developing nations RIM is moving 2.5G phones, and Marvell does not have a chip for 2.5G. However, Marvell should have such a chip later this year.
So two major sources of revenue Marvell counted on were down in Q4 and will continue to be down in Q1. But the big issue, the lack of an inflection point, has to do with OPhones in China. These phones sold slowly late in 2010. Sehat believes that is mainly a matter of introducing them and prices that were too high on the original models. During 2011 a number of Marvell based OPhones will be introduced in China at far more attractive prices, yet which maintain Marvell's own profit margins.
Hence, still an upward inflection point. I don't blame potential Marvell investors to take a wait and see approach. The problem (with not buying at today's stock price) is that Marvell, even in these "bad" quarters, is generating a lot of cash. The low price/earnings ratio for the stock reflects the "show me" attitude about OPhones. If you wait for the revenue ramp to be in the rear-view mirror, the stock is going to be a lot more expensive.
So watch for OPhone news out of China. Maybe consumers there will want iPhones or other alternatives instead. But if hundreds of millions buy the new Marvell-based OPhones, Sehat and crew are going to look a lot more far-sighted than they do right now.
I own Marvell stock and understand the risk of competing against the talented people at Qualcomm, NVIDIA, Apple, etc. Right now I would not sell my Marvell stock for less than $30 per share. Come this fall, depending on the OPhone ramp, I may need to change my estimate of its value.
See also:
http://www.marvell.com/
My March 2011 Marvell (MRVL) analyst call summary
Tuesday, June 1, 2010
Marvell Tablet Computers on Way
As a brand, Marvell Technology Group is little known to the general public. Yet if you own a hard drive, odds are better than even that it has a Marvell chip in its interface. In fact Marvell is a key supplier of many semiconductor devices that go into cell phones, wireless and hardwired networking equipment, and printers.
Marvell executives have been talking about tablet computers built around their chips for a while. Yet while they are willing to talk about the superiority of their technology solutions, they often don't say who their OEM partners are, much less pre-announce the end products. Now, however, we are beginning to see the veil of secrecy lift. Most notably we have an announcement of a new eReader by Hawang and the adoption of the Marvell platform for One Laptop Per Child.
Within a few years China will be the biggest national market for both smartphones and tablet computers. Future smartphones in China means OPhones, and Marvell is dominating in design wins for OPhones. For tablets Marvell's design platform is called Moby. For One Laptop Per Child the result would cost in the range of $100. Commercial products will have many variable in their end price, notably the size of the screen and whether it is grayscale like a Kindle or color like an iPad.
In between smartphones and tablets in size are book readers. Hawang has been producing eReaders for the Chinese market since 2008. The Marvell based model is due out by September. According to Hawang it offers "better performance at a better price ... true mass market pricing." This is possible because of Marvell's intellectual property and ability to put many functions on a single chip. Notably this single chip solution (SoC - System on a Chip) includes an integrated e-Paper Display (EPD) controller. It can display standard pdf documents and requires very little power.
Marvell's chips can include application processing, digital signal processing, video processing, and wireless technologies like cell phone modems, Wi-Fi, and Bluetooth. Everything needed for tablet computing.
The iPad tablet computer is a nifty device. We know Apple is famous for its high markups, so there is already room for iPad price drops. But the average American employee cannot afford an iPad (it represents a week's take home pay), much less the average Chinese or developing nation employee. Give them the functional equivalent at $100 to $200, however, and my guess is they will snap up tablets. With the kinds of volumes we are looking at in the China market alone, their should still be reasonable profit margins for Marvell and its OEM partners.
I expect we will see OEM announcements of tablets that are based on Marvell chips as we progress through the year.
Keep in mind that this is a very competitive market. In addition to Apple's internally developed chips (which almost certainly won't be sold to OEMs), top competitors include Broadcom, Qualcomm (Snapdragon chips), Intel, TI, and Freescale.
Resources:
One Laptop Per Child's Next Move [New York Times, May 27. 2010]
Marvell and Hawang E-Reader [Marvell release June 1, 2010]
One Laptop Per Child and Marvell Join Forces [Marvell release May 27, 2010]
Marvell Moby Technology site
Marvell fiscal Q2 2010 results release
Marvell executives have been talking about tablet computers built around their chips for a while. Yet while they are willing to talk about the superiority of their technology solutions, they often don't say who their OEM partners are, much less pre-announce the end products. Now, however, we are beginning to see the veil of secrecy lift. Most notably we have an announcement of a new eReader by Hawang and the adoption of the Marvell platform for One Laptop Per Child.
Within a few years China will be the biggest national market for both smartphones and tablet computers. Future smartphones in China means OPhones, and Marvell is dominating in design wins for OPhones. For tablets Marvell's design platform is called Moby. For One Laptop Per Child the result would cost in the range of $100. Commercial products will have many variable in their end price, notably the size of the screen and whether it is grayscale like a Kindle or color like an iPad.
In between smartphones and tablets in size are book readers. Hawang has been producing eReaders for the Chinese market since 2008. The Marvell based model is due out by September. According to Hawang it offers "better performance at a better price ... true mass market pricing." This is possible because of Marvell's intellectual property and ability to put many functions on a single chip. Notably this single chip solution (SoC - System on a Chip) includes an integrated e-Paper Display (EPD) controller. It can display standard pdf documents and requires very little power.
Marvell's chips can include application processing, digital signal processing, video processing, and wireless technologies like cell phone modems, Wi-Fi, and Bluetooth. Everything needed for tablet computing.
The iPad tablet computer is a nifty device. We know Apple is famous for its high markups, so there is already room for iPad price drops. But the average American employee cannot afford an iPad (it represents a week's take home pay), much less the average Chinese or developing nation employee. Give them the functional equivalent at $100 to $200, however, and my guess is they will snap up tablets. With the kinds of volumes we are looking at in the China market alone, their should still be reasonable profit margins for Marvell and its OEM partners.
I expect we will see OEM announcements of tablets that are based on Marvell chips as we progress through the year.
Keep in mind that this is a very competitive market. In addition to Apple's internally developed chips (which almost certainly won't be sold to OEMs), top competitors include Broadcom, Qualcomm (Snapdragon chips), Intel, TI, and Freescale.
Resources:
One Laptop Per Child's Next Move [New York Times, May 27. 2010]
Marvell and Hawang E-Reader [Marvell release June 1, 2010]
One Laptop Per Child and Marvell Join Forces [Marvell release May 27, 2010]
Marvell Moby Technology site
Marvell fiscal Q2 2010 results release
Monday, May 24, 2010
Marvell Profits from R&D
In most of the computer and electronics industry the 3rd and 4th quarters are hot. Then Q1, and Q2 are seasonally down. Not that much is selling; inventory is being built for back-to-school, then for the consumer holiday spree and and-of-year corporate buying. This year so far is trending a bit different for many electronic parts suppliers because of the rapid recovery from the 2009 business panic. Judging from its quarter ending May 1, 2010 (its first fiscal quarter of 2011), Marvell Technology Group (MRVL) is benefitting from more than just industry trends.
Marvell first came to dominate the hard drive semiconductor chip industry, and those chips still account for over half of Marvell's revenue. Marvell engineers lead in combining analog and digital chip functions, so we are seeing market penetration in areas where this is an advantage. So far this has been in wired and wireless networking chips and in cell phones, particularly in smartphones. Marvell makes chips for Wi-Fi and Bluetooth, for the wireless signal that connects to cell towers, and for application processors that give the phones their ability to act like computers. While its entry into this market is relatively recent, it is already a major player.
In Q1 Revenue was $856 million, up 2% sequentially from $842.5 million and up 64% from $521 million in the year-earlier quarter. The mobile and wireless end market accounted for about 22% of revenue, so about $188 million. The segment grew 18% sequentially, and that despite Wi-Fi chips "only" growing 6% sequentially.
What is most likely to happen in the next few quarters is that wired networking and storage chips will do their usual annual ramp based on demand, plus any market share gain. Smartphone revenue will continue its explosive growth as a larger number of phones using Marvell's chips are brought to market. And the ramp will include chips for oPhones in China, which by 2011 should, by themselves, be a major source of revenue for Marvell.
In a normal market, Marvell would have a high PE ratio because of its track record and future prospects. But this is no normal market. It is a fear-driven, better a 0% treasury than a 8% stock market. It's pretty weird. Who knows, maybe the world will end and we will sink into an economic depression. But I have news for you. In that case, U.S. treasuries will be as worthless as stocks, because there will be no way the government can raise enough in taxes to cover interest payments.
I own Marvell stock to my portfolio rules limit. I could be wrong, maybe a competitor or two will best Marvell in some segment of the market, but I believe the most probable outlook is that in a few years everyone will wish they had bought Marvell in 2009 or the spring of 2010.
That's my opinion. You can also get the facts, as management presents them, by reading my Marvell MRVL analyst conference summaries.
And of course see also www.marvell.com
Marvell first came to dominate the hard drive semiconductor chip industry, and those chips still account for over half of Marvell's revenue. Marvell engineers lead in combining analog and digital chip functions, so we are seeing market penetration in areas where this is an advantage. So far this has been in wired and wireless networking chips and in cell phones, particularly in smartphones. Marvell makes chips for Wi-Fi and Bluetooth, for the wireless signal that connects to cell towers, and for application processors that give the phones their ability to act like computers. While its entry into this market is relatively recent, it is already a major player.
In Q1 Revenue was $856 million, up 2% sequentially from $842.5 million and up 64% from $521 million in the year-earlier quarter. The mobile and wireless end market accounted for about 22% of revenue, so about $188 million. The segment grew 18% sequentially, and that despite Wi-Fi chips "only" growing 6% sequentially.
What is most likely to happen in the next few quarters is that wired networking and storage chips will do their usual annual ramp based on demand, plus any market share gain. Smartphone revenue will continue its explosive growth as a larger number of phones using Marvell's chips are brought to market. And the ramp will include chips for oPhones in China, which by 2011 should, by themselves, be a major source of revenue for Marvell.
In a normal market, Marvell would have a high PE ratio because of its track record and future prospects. But this is no normal market. It is a fear-driven, better a 0% treasury than a 8% stock market. It's pretty weird. Who knows, maybe the world will end and we will sink into an economic depression. But I have news for you. In that case, U.S. treasuries will be as worthless as stocks, because there will be no way the government can raise enough in taxes to cover interest payments.
I own Marvell stock to my portfolio rules limit. I could be wrong, maybe a competitor or two will best Marvell in some segment of the market, but I believe the most probable outlook is that in a few years everyone will wish they had bought Marvell in 2009 or the spring of 2010.
That's my opinion. You can also get the facts, as management presents them, by reading my Marvell MRVL analyst conference summaries.
And of course see also www.marvell.com
Monday, March 8, 2010
Marvell Sees Inflection Point
Marvell Technology Group, Ltd. (MRVL) is led by Sehat Sutardja, who built the company on his invention of a better chip to enable hard disk drives. Marvell has been the leading (by market share) supplier of hard drive controller chips for years, and this segment still represented 50% of revenue for the latest quarter. Marvell has also branched out to a variety of newer areas, based on its ability to combine analog functions and digital functions on a single chip (called SoC, for System on Chip).
Marvell was hit hard by the recession: in fiscal Q4 2009, ending January 30, 2009, it had $512 million in revenues, down from a peak of $843 million in the quarter ending August 2, 2008.
Last week Marvell reported for fiscal Q4 2010, ending January 30, 2010, revenues of $842 million. GAAP net income was an amazing $205 million; cash flow from operations was $281 million.
But the future, while speculative, could be even more amazing. Sehat referred to a coming inflection point. An inflection point on a curve can be from going down to up or vice versa, but in this case he is talking about a dramatic increase is Marvell's revenue growth rate.
As I have pointed out in the past, Marvell spent a lot of money on research and development in the earlier part of this decade, and only cut back a little during the recession. This year new products that were sampled in 2009 are ramping into volume production, and new products sampling this year are going to ramp in 2011. What are those new products?
Most notable are "communication processors" for smart phones, particularly the oPhone beginning to be sold in China. In order to get a price point low enough for mass marketing in China, more features than ever before had to be integrated into a single semiconductor chip. Marvell is unique in being able to offer general application and signal processing, Wi-Fi, Bluetooth, graphics, and cellular modem. Over 90% of oPhone models (there are several companies building them) use Marvell chips.
This alone could be sufficient to cause the inflection point. While the oPhones are far less expensive than models sold in the U.S., Marvell gets very good profit margins on the chips it makes for them. Start multiplying these per-chip margins by the 100s of millions of likely oPhone buyers in China, and you can see the potential.
But there is more. Marvell has become an increasingly prominent player in high-speed Internet switching chips. The competition there is intense, but intense competition has not impeded Marvell for very long in other fields it has chosen to enter.
Many of the newer products will be based on a microprocessor line called Armada. The thing about Marvell is that unlike Intel, they usually don't just make a microprocessor and sell it to customers who put it in a socket. Marvell works with manufacturers to integrate exactly what they need for their products on a single chip that incorporates the microprocessor. This gives faster execution and communication times and reduces costs, while leaving Marvell an ample profit margin.
Expect new products to be announced based on Marvell technology all though 2010 and 2011 (and likely well beyond).
While competition is intense and there are many pitfalls, it looks to me like Marvell is going to become the very center of the semiconductor chip industry during this decade. Of course others have already entered the SoC business, and stand-alone chips will continue to be manufactured for equipment with volumes insufficient to justify an SoC design. I'm not saying the engineers at Intel, AMD, NVIDIA, Broadcom, Microchip, etc. are not very good, and all these companies have plenty of financial ability to compete however they like. But Marvell seems to have found how to
I have owned Marvell stock since January 2005.
For detailed results from Marvell's latest reported quarter, see my
Marvell Technology (MRVL) Q4 2010 analyst conference summary
See also www.marvel.com
Marvell was hit hard by the recession: in fiscal Q4 2009, ending January 30, 2009, it had $512 million in revenues, down from a peak of $843 million in the quarter ending August 2, 2008.
Last week Marvell reported for fiscal Q4 2010, ending January 30, 2010, revenues of $842 million. GAAP net income was an amazing $205 million; cash flow from operations was $281 million.
But the future, while speculative, could be even more amazing. Sehat referred to a coming inflection point. An inflection point on a curve can be from going down to up or vice versa, but in this case he is talking about a dramatic increase is Marvell's revenue growth rate.
As I have pointed out in the past, Marvell spent a lot of money on research and development in the earlier part of this decade, and only cut back a little during the recession. This year new products that were sampled in 2009 are ramping into volume production, and new products sampling this year are going to ramp in 2011. What are those new products?
Most notable are "communication processors" for smart phones, particularly the oPhone beginning to be sold in China. In order to get a price point low enough for mass marketing in China, more features than ever before had to be integrated into a single semiconductor chip. Marvell is unique in being able to offer general application and signal processing, Wi-Fi, Bluetooth, graphics, and cellular modem. Over 90% of oPhone models (there are several companies building them) use Marvell chips.
This alone could be sufficient to cause the inflection point. While the oPhones are far less expensive than models sold in the U.S., Marvell gets very good profit margins on the chips it makes for them. Start multiplying these per-chip margins by the 100s of millions of likely oPhone buyers in China, and you can see the potential.
But there is more. Marvell has become an increasingly prominent player in high-speed Internet switching chips. The competition there is intense, but intense competition has not impeded Marvell for very long in other fields it has chosen to enter.
Many of the newer products will be based on a microprocessor line called Armada. The thing about Marvell is that unlike Intel, they usually don't just make a microprocessor and sell it to customers who put it in a socket. Marvell works with manufacturers to integrate exactly what they need for their products on a single chip that incorporates the microprocessor. This gives faster execution and communication times and reduces costs, while leaving Marvell an ample profit margin.
Expect new products to be announced based on Marvell technology all though 2010 and 2011 (and likely well beyond).
While competition is intense and there are many pitfalls, it looks to me like Marvell is going to become the very center of the semiconductor chip industry during this decade. Of course others have already entered the SoC business, and stand-alone chips will continue to be manufactured for equipment with volumes insufficient to justify an SoC design. I'm not saying the engineers at Intel, AMD, NVIDIA, Broadcom, Microchip, etc. are not very good, and all these companies have plenty of financial ability to compete however they like. But Marvell seems to have found how to
I have owned Marvell stock since January 2005.
For detailed results from Marvell's latest reported quarter, see my
Marvell Technology (MRVL) Q4 2010 analyst conference summary
See also www.marvel.com
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