Marvell: Fiscal 4Q12 Financial Results

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Abstracts of the earnings call transcript:


Sehat Sutardja, CEO:

"Finally, moving to our storage end market. Q4 revenues declined by approximately 31% sequentially, and that represented about 40% of our total revenues in the quarter. This large sequential decline was mainly due to the impact of the Thailand floods.

"During the quarter, the industry began to recover from the impact of the Thailand floods. Although slightly later than we had originally anticipated, we are very pleased with the progress that has been made overall. We expect Marvell to benefit from multiple quarters of sequential growth as the industry works to get back to full capacity over the next few quarters.

"In addition, we are seeing excellent demand for our next-generation, 2.5-inch, 500 gigabyte-per-platter SoC solutions, which grew strongly in the quarter. (...) We are now shipping our 500 gigabytes solutions to all of the drive customers and expect continued growth for these devices throughout this year. I would like to stress that the 500-gigabyte capacity point is a technologically challenging one, and ours is the first and currently only solution in the market.

"Revenues from our SSD controllers was very strong and more than doubled during the quarter. As you may recall, our revenue milestone for SSD was to exit the year at a quarterly run rate of double that of the prior year. We are proud to report that we exceeded our original goal by a significant amount. We expect multiple devices, including ultrabooks, to come to market with our SSD controller technology this year. While SSD volumes are still small compared to traditional HDDs, we are very well positioned to benefit from the growth of the SSD market over the next few years. For fiscal 2012, storage represented 46% of total revenues and declined 5% over the previous year. For Q1, given the well-documented recovery of the hard disk drive industry, we anticipate our storage end market to grow in the range of 10% to 20% sequentially.

"Storage is - this is an area where we have been - this is truly our playground, our territory. If you look at the competitions from a decade ago, when we had a dozen to 20 competitors, and we only have 1 left. And that's not - and maybe that's not so important to know, but it's more important to know that in the 500 gigabyte-per-platter, 2.5 inch drive, we are in all customers. We have design wins in all customers. And a lot of these customers are ramping up as we speak. So as to that impact, most of the ramp-up is limited by the amount of components that can be built because of the flood. These new platforms, the 500 gigabytes, use new SoC, but that's not the bottleneck. The bottleneck is the new base plates, the new motors that they're using into this 500 gigabytes per platter. But again, as these new CNC machines are being brought in as we speak, and my gut feeling talking to the base plate manufacturers, this will be completed in the next few months, as these equipments are being brought up to production. A lot of the components will be more widely available for these 500 gigabytes-per-platter solutions.

"As we mentioned many times in the past, we've been investing in SSDs for almost - more than 6 years already. (...) we also know that there's a cost disadvantage in SSDs, which over the last decade - over the last decade and a half we're looking into this. It's always about around 8:1 to 10:1 ratio. So we know that for us to be a leader in this market, we need to put our best into both sides. For people, they really care to build truly the thinnest of the thinnest laptops. The SSD will be the natural choice regardless what the price is. That's a price-insensitive market. For the billions of people in the world that wants to have, let's say, ultrabook-like laptops, they will not be able to afford to pay more than, let's say, $399 for the laptops. In that case, somehow we need to solve this problem some other way, and you already mentioned one way to do it is to have a hybrid solution. So it's clear that the hybrid solution will be an important solution for the 80% of the [indiscernible] people in the world, they cannot afford to pay for the full SSD solution. So we've also been working on hybrid solution, again for the last 5 years. And not to mention, even that we thought that there will always be markets in the bottom, maybe 50% of the market, maybe even the hybrids, maybe they can afford to pay. Those other markets, they will be targeting the sub $250, $300, sub $300 laptops. So those other markets are going to be served with traditional HDDs. In this case, we still need to make them look sexy. So 3 years ago, we spearheaded the industry to move to 7 millimeter. (...) Marvell was the only one that pushed this technology into the market and basically convinced the whole supply chain to build the 7 millimeter. And I mean, it's happening, so it's ramping up now. And about 1.5 year ago, we realized that 7 millimeter, maybe it's great but maybe a little bit too thick. So we also spearheaded the industry to move to 5 millimeter. So it's also happening. I'm glad to mention it that this 5 millimeter activity is finally happening, and 5 millimeter HDD will be thinner than the battery, the cell phone battery that you have in your cell phone. So imagine, if you can build beyond Ultrabooks with a HDD that is thinner than the cell phone battery. So look at it (...) the 4x high-performance SSD, but we also we never forget that the cost is also important. So we have all the solutions to serve the rich and people - the rich customer base. But we also build products to serve the rest of the world, which can only pay for like $30, $40 for the storage instead of $200."


Clyde Hosein, CFO:

"In storage, our overall sales was good even after taking into account effects of the Thailand floods on the hard disk drive industry. Prior to the floods, we gained about 5 points of share in HDDs as we ramped new products at the new customer in their mobile platforms."