Marvell Technology Group (MRVL) reported fourth-quarter fiscal 2014 adjusted earnings (including stock-based compensation but excluding amortization, acquisition, restructuring and legal related expenses) of 22 cents per share which beat the Zacks Consensus Estimate of 18 cents per share. On a year-over-year basis, earnings per share soared 72.1% primarily due to higher revenues and operating margin expansion.
Quarter Details
Marvell reported revenues of $931.7 million in the fourth quarter, up 20.2% year over year, and surpassed the Zacks Consensus Estimate of $893.0 million. The quarter’s revenues also came ahead of management’s guidance range $880.0–$920.0 million. The year-over-year improvement in revenues was primarily due to steady performance from the storage and networking business which more than offset the seasonal decline in wireless business.
Storage revenues were positively impacted by strong demand from SSD customers and share gains in the HDD segment. The networking business also witnessed higher-than-expected demand from enterprise and service provider customers. However, delayed product launches and seasonality in the wireless connectivity business impacted the sales in mobile and wireless end market.
Marvell’s adjusted gross margins dropped 308 basis points (bps) on a year-over-year basis to 49.8%. On a year-over-year basis, the company witnessed a 426 bps expansion in its adjusted operating margins primarily due to lower operating expenses as a percentage of revenues (down 733 bps).
Marvell’s adjusted net margins (including stock-based compensation but excluding amortization, acquisition, restructuring and legal related expenses) expanded 336 bps year over year to 12.1%.
Marvell ended the quarter with cash, cash equivalents and short-term investments of $1.97 billion compared to $1.80 billion in the previous quarter. The company generated $100.5 million cash from operating activities and had free cash flow of $82.0 million. The company carries no long-term debt. During the quarter, Marvell paid dividends of $29.9 million.
Guidance
Marvell expects first-quarter 2015 revenues in the range of $870.0–$910.0 million, higher than the Zacks Consensus Estimate of $856 million.
Revenues from Storage are expected to decrease sequentially in mid-to-high single digits due to seasonality. The company expects networking revenues to remain flat. Management expects growth in its mobile business but seasonal decline in Marvell’s non-mobile connectivity business. Nonetheless, management expects strong demand for the company’s 4G LTE platform.
Management expects non-GAAP gross margin to be 50.0% (+/-100 bps) for the forthcoming quarter while non-GAAP operating expenses are expected to be $330.0 million (+/-$10 million). The company expects non-GAAP earnings per share to be 22 cents (+/- 2 cents) while the Zacks Consensus Estimate is pegged at 14 cents.
Our Take
Marvell delivered decent fourth-quarter results which came ahead of the Zacks Consensus Estimate. Revenue contributions from the end markets were in line with the expectations. Moreover, the company provided encouraging guidance as well.
We remain positive on Marvell’s diverse revenue model and stable balance sheet. However, we remain concerned about stiff competition in the semiconductor market from major players such as Intel Corp. (INTC), Texas Instruments Inc. (TXN) and LSI Corp. (LSI). Sluggish macroeconomic conditions and higher material costs are the near-term headwinds.
Currently, Marvell Technology has a Zacks Rank #3 (Hold).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment