(MRVL) Marvell Technology Group Earnings Preview

Marvell Technology Group (MRVL) is scheduled to announce its first quarter 2012 results on May 26, 2011, and we see limited revisions in analyst estimates at this point of time.

Fourth Quarter Overview

Marvell Technology delivered a disappointing fourth quarter with its top and bottom lines missing the Zacks Consensus Estimates.

Marvell Technology’s fourth quarter 2011 revenue grew 7.0% from the year-ago quarter, but was below the company’s guidance range. The quarter’s revenue was affected to some extent by seasonal declines in the company’s mobile and wireless businesses and a significant slowdown in PC sales.

An increase in expenses led to margin contraction. As a result, earnings per share remained flat year over year at 35 cents.

Despite the weak results, management remains upbeat about its existing and newly launched products, which are competitive enough to benefit from the revival in demand.

First Quarter Guidance

Marvell expects revenue in the range of $800.0 million to $850.0 million, and EPS of about 30 cents. The revenue guidance indicates a mid single-digit sequential drop in storage products, with a 20% drop in the Mobile and Wireless segment.

Agreement of Analysts

Out of the nine analysts providing estimates for both the first quarter and fiscal 2012, none made any revision to estimates in the past thirty days. We noticed a similar lack of movement in fiscal 2012 estimates.

We noticed that most of the analysts were standing by their estimates in the last quarter, as there were no major catalysts to drive the stock.

Analysts have positive expectations for the second half of fiscal 2012. They are also positive on the company’s aggressive share buyback plans, but a weak outlook and lackluster demand and a potential supply cut at its major customer, Research In Motion Ltd. (RIMM), keeps them cautious.

Magnitude of Estimate Revisions

We did not observe any movement in the Zacks Consensus Estimate for the first quarter in the past thirty days. However, in the last ninety days, the Zacks Consensus Estimates for the first quarter and fiscal 2012 fell significantly from 33 cents and $1.54 to 26 cents and $1.34, respectively. The estimate for fiscal 2012 dropped drastically from $1.72 to $1.53 in the past ninety days.

The sharp drop in our estimates indicates concerns related to weak PC sales.

Recommendation

For the first quarter, weak PC demand and uncertainty in Marvell’s baseband business remain concerns. Though Marvell Technology’s strong execution and favorable position in the computing market are positives, we remain apprehensive regarding stiff competition in the semiconductor market from major players such as Intel Corp. (INTC), Texas Instruments Inc. (TXN) and LSI Corp. (LSI). A significant number of pending lawsuits and the company’s European exposure also concern us.

Currently, Marvell Technology has a Zacks #3 Rank, implying a short-term Hold recommendation.

INTEL CORP (INTC): Free Stock Analysis Report

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MARVELL TECH GP (MRVL): Free Stock Analysis Report

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TEXAS INSTRS (TXN): Free Stock Analysis Report

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