Marvell: Fiscal 1Q13 Financial Results

(in US$ million)	1Q12	1Q13
Revenues	802.4	796.4
*Growth*		-0%
Net income (loss)	146.9	94.5

Marvell Technology Group Ltd. reported financial results for the first quarter of fiscal 2013, ended April 28, 2012.

Revenue for the first quarter of fiscal 2013 was $796 million, a 7 percent sequential increase from $743 million in the fourth quarter of fiscal 2012, ended January 28, 2012, and down slightly from $802 million in the first quarter of fiscal 2012, ended April 30, 2011.

GAAP net income for the first quarter of fiscal 2013 was $95 million, or $0.16 per share (diluted), compared with GAAP net income of $81 million, or $0.13 per share (diluted), for the fourth quarter of fiscal 2012, and $147 million, or $0.22 per share (diluted), for the first quarter of fiscal 2012.

Non-GAAP net income was $139 million, or $0.23 per share (diluted), for the first quarter of fiscal 2013, compared with non-GAAP net income of $127 million, or $0.21 per share (diluted) for the fourth quarter of fiscal 2012 and $189 million, or $0.29 per share (diluted) for the first quarter of fiscal 2012.

"Our results in the first quarter were better than anticipated driven in part by our TD smartphone products, which grew about 25% sequentially and increased deployment of our 500 gigabyte per platter mobile storage solutions to all the hard disk drive manufacturers," said Dr. Sehat Sutardja, Marvell’s chairman and CEO. "This financial performance gave us the confidence to increase our share repurchase program by $500 million to a total of $2.5 billion, and based on broad institutional shareholder request, to also initiate a quarterly dividend of 6 cents per share."

GAAP gross margin for the first quarter of fiscal 2013 was 54.0 percent, compared to 54.1 percent for the fourth quarter of fiscal 2012 and 58.3 percent for the first quarter of fiscal 2012.

Non-GAAP gross margin for the first quarter of fiscal 2013 was 54.5 percent, compared to 54.5 percent for the fourth quarter of fiscal 2012 and 58.5 percent for the first quarter of fiscal 2012.

Shares used to compute GAAP net income per diluted share for the first quarter of fiscal 2013 were 595 million shares, compared with 599 million shares in the fourth quarter of fiscal 2012 and 657 million shares in the first quarter of fiscal 2012. Shares used to compute non-GAAP net income per diluted share for the first quarter of fiscal 2013 were 606 million shares, compared with 606 million shares for the fourth quarter of fiscal 2012 and 663 million shares for the first quarter of fiscal 2012.

Cash flow from operations for the first quarter of fiscal 2013 was $199 million, up from the $69 million reported in the fourth quarter of fiscal 2012 and up from the $177 million in the first quarter of fiscal 2012. Free cash flow for the first quarter of fiscal 2013 was $178 million, up from the $38 million reported in the fourth quarter of fiscal 2012 and up from the $157 million in first quarter of fiscal 2012. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of IP licenses.

Under the share repurchase program, Marvell repurchased approximately 15 million shares for a total of $223 million in the first quarter of fiscal 2013. Over the past seven quarters, Marvell has repurchased and retired approximately 107 million shares, or about 16 percent, of its outstanding shares demonstrating its commitment to returning shareholder value.

Marvell also announced that it had declared the payment of its first quarterly dividend of $0.06 per share to be paid on July 11, 2012 to all shareholders of record as of June 21, 2012. In addition, Marvell announced today that it has authorized an increase of up to an additional $500 million under the existing share repurchase program.

Comments

Abstracts of the earnings call transcript:

Sehat Sutardja, president, chairman and CEO:
"The reason for the better-than-expected revenue performance was 25% sequential growth in our TD-SCDMA revenues and increased deployment by all of the drive customers for our industry leading 500 gigabyte per platters mobile HDD products. This is in contrast to the overall revenues for our nearest competitor in the TD market, which declined double digits while our competitor in the storage space are not shipping similar 500-gigabyte technology.
" (…) we are forecasting our second quarter revenue to increase in the range of 6% to 12% sequentially. We expect our TD revenues to grow again by more than 20% and the 500-gigabyte revenues to grow about 50%.
"Now finally moving to our storage markets. Q1 revenues increased by approximately 20% sequentially. This was at the high end of our earlier projected range. Storage represented about 45% of the total revenues in the quarter.
"In Q1, our HDD unit volumes increased consistent with the recovery from the effects of the flood. And we now believe that by the end of the quarter, the flood-related impact will be behind us. More importantly, there was a significant increase in demand for our 500 gigabyte per platter mobile drives, which grew 2.5x in Q1, and that represented over 25% of our unit shipments. By the way, we are now shipping these 500-gigabyte products to every HDD customer with little competition.
" (…) we expect volumes from our 500 gigabyte per platter products to increase by over 50% this quarter and should represent over 35% of our units shipped.
"In addition and in response to increased adoption of thin or ultrabooks, we expect to see demand for 7-millimeter form factor drives to increase later this year at lower cost alternative to solid-state drive base ultrabooks. Such small form factor drives can only afford a single platter, and therefore need to have the highest possible capacity per platter. Marvell is the only solution provider today, combining both 7-millimeter form factor and the highest capacity point of 500 gigabytes.
"Let me now address the enterprise HDD space. Revenues increased by about 20% from existing customers, and I'm now proud to report that we began to ramp in two new next-generation enterprise designs. One of these designs is at the biggest enterprise HDD supplier. We expect the ramp in the enterprise HDD to continue for the remainder of the year.
"Now moving to our SSD business, revenues from our SSD controllers was in line with our expectations and softer at the end of prior quarter. As most of you know, many of our leading customers indicated softer SSD sales recently and they attributed it to mainly to a return to normalcy from the temporary shortages in the HDD market. Nevertheless, our SSD design win momentum remains strong, and we expect multiple devices, including ultrabooks and hybrid drives - hybrid devices to come to market with our SSD controller technology, and we remain on track to deliver excellent growth this year. In this nascent SSD market, we believe we already have over 50% of the merchant silicon controller share today and our design traction leads us to believe that we will increase this as the market develops. For fiscal Q2, we anticipate our overall storage end market to grow in the range of 10% to 15% sequentially."

Clyde Hosein, CFO:
" (…) we expect our storage end market to increase between 10% and 15% sequentially."