Marvell Inc.(MRVL) reported fourth quarter fiscal 2011 adjusted earnings per share (EPS) of 35 cents, below the Zacks Consensus Estimate of 37 cents.
Revenue
Marvell reported revenues of $900.5 million in the fourth quarter, up 7.0% from $842.5 million in the prior-year quarter. The quarter’s revenue was below the Zacks Consensus Estimate of $924.0 million and was at the lower end of the company’s guidance range of $900.0–$950.0 million. The fourth quarter was affected to some extent by seasonal declines in the company’s mobile and wireless end market business. But Marvell’s products are competitive and may be expected to perform well in the coming years.
Operating Results
In the fourth quarter, gross margin on a GAAP basis declined 100 basis points (bps) year over year to 58.7%. Gross margin declined as a result of increase in cost of sales. Operating margin on a GAAP basis decreased 50 bps year over year to 23.9%. Total operating expenses were $312.9 million, up 5.4% from $296.9 million in the earlier-year quarter.
GAAP net income in the quarter was $222.8 million, or 33 cents per share, compared to $204.8 million, or 31 cents in the year-earlier period. Excluding stock-based compensation, net income on non-GAAP basis was $241.6 million, or 35 cents per share, compared to $235.5 million, or 35 cents in the year-earlier period.
Balance Sheet & Cash Flow
Marvell ended the quarter with cash, equivalents and short-term investments of $2.93 billion, up from $2.68 billion in the prior quarter. Accounts receivables were $459.4 million, compared to $468.0 million in the prior quarter. Inventories increased to $245.5 million, up from $239.2 million preceding quarter. The company carries no long-term debt.
Cash from operating activities was $250.8 million in the fourth quarter, compared to $281.1 million in the prior-year quarter. Free cash flow was $213 million, compared to $253 million reported in the year-ago period.
Our Take
The quarter’s results were disappointing, as the bottom line was below the Zacks Consensus Estimate. 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). We are also concerned about the significant number of pending lawsuits and the company’s European exposure.
Currently, Marvell has a short-term Sell recommendation, as indicated by the Zacks #4 Rank.
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