EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

For further information, contact:     
Jeff Palmer      Tom Hayes
Investor Relations      Corporate Communications
408-222-8373      408-222-2815
jpalmer@marvell.com      tom@marvell.com

Marvell Technology Group Ltd. Reports Fiscal Third Quarter Results

Revenue: $803.1 Million, Up 25 Percent Sequentially

GAAP Net Income: $201.6 Million, $0.31 per share EPS

Free Cash Flow: $195.9 Million, 24 Percent of Revenues

Santa Clara, California (December 3, 2009) — Marvell Technology Group Ltd. (NASDAQ: MRVL), a world leader in storage, communications and consumer silicon solutions, today reported financial results for the third quarter of fiscal 2010, ended October 31, 2009.

Net revenue for the third quarter of fiscal 2010 was $803.1 million, a 25 percent sequential increase from $640.6 million in the second quarter of fiscal 2010, ended August 1, 2009, and a 2 percent increase from $791.0 million in the third quarter of fiscal 2009, ended November 1, 2008.

GAAP net income was $201.6 million, or $0.31 per share (diluted), for the third quarter of fiscal 2010, as compared to GAAP net income of $58.5 million, or $0.09 per share (diluted), for the second quarter of fiscal 2010. For the third quarter of fiscal 2009 GAAP net income was $70.9 million, or $0.11 per share (diluted).

Non-GAAP net income was $231.8 million, or $0.35 per share (diluted), for the third quarter of fiscal 2010, an increase of 95 percent from non-GAAP net income of $118.7 million, or $0.18 per share (diluted), for the second quarter of fiscal 2010, and a 59 percent increase compared with non-GAAP net income of $145.3 million, or $0.23 per share (diluted), for the third quarter of fiscal 2009.

“We are very pleased with the revenue growth we experienced in the third quarter of fiscal 2010,” said Dr. Sehat Sutardja, Marvell Chairman and Chief Executive Officer. “Our sequential revenue growth was better than our revised guidance provided on October 26, 2009, as order momentum improved across all our addressable end-markets. Our results during the third quarter demonstrate that financial discipline is firmly entrenched in Marvell’s long-term business model as we again delivered significant improvement across all financial metrics.”

 

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Marvell reports net income or loss, basic and diluted net income or loss per share in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income or loss to non-GAAP net income for the three months ended October 31, 2009, August 1, 2009 and November 1, 2008, respectively, appear in the financial statements below.

GAAP gross margin for the third quarter of fiscal 2010 was 57.5 percent, compared to 55.0 percent for the second quarter of fiscal 2010 and 52.1 percent for the third quarter of fiscal 2009. Non-GAAP gross margin for the third quarter of fiscal 2010 increased to 57.8 percent, compared to 55.3 percent for the second quarter of fiscal 2010 and 52.3 percent for the third quarter of fiscal 2009.

Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2010 were 660 million shares, compared with 648 million shares in the second quarter of fiscal 2010 and 631 million shares in the third quarter of fiscal 2009. Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2010 were 664 million shares, compared with 652 million shares for the second quarter of fiscal 2010 and 633 million shares for the third quarter of fiscal 2009.

Cash flow from operations for the third quarter of fiscal 2010 was $203.5 million, up 12 percent sequentially from $182.3 million in the second quarter of fiscal 2010 and down 21 percent from $258.5 million in the third quarter of fiscal 2009. Free cash flow, defined as cash flow from operations less capital expenditures and purchases of IP licenses, was $195.9 million, up 12 percent sequentially from $175.3 million in the second quarter of fiscal 2010 and down 20 percent from $244.3 million in the third quarter of fiscal 2009.

Conference Call

Marvell will be conducting a conference call on December 3, 2009 at 1:30 p.m. PST to discuss results for the third quarter ended October 31, 2009. Interested parties may dial-in to the conference call at 1-866-271-0645, pass-code 78345706. The call is being webcast by Thomson Reuters and can be accessed at Marvell’s website under the Investor Events section of the Investor Relations page at http://www.marvell.com/investors/events.jsp. Replay on the internet will be available following the call until January 3, 2009.

 

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Discussion of Non-GAAP Financial Measures

Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discrete events that management does not consider to be directly related to Marvell’s core operating performance. Non-GAAP earnings per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP earnings per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of compensation costs expected to be incurred in future periods, but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Marvell believes that the presentation of non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to Marvell’s financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell’s Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.

About Marvell

Marvell (NASDAQ: MRVL) is a global leader in the development of storage, communications and consumer silicon solutions. Marvell’s diverse product portfolio includes switching, transceiver, communications controller, wireless, and storage solutions that power the entire communications infrastructure, including enterprise, metro, home, and storage networking. As used in this release, the terms “Company” and “Marvell” refer to Marvell Technology Group Ltd. and its subsidiaries. For more information visit www.marvell.com

 

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Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the Company’s expectations regarding the entrenchment of financial discipline; and statements concerning the Company’s use of non-GAAP financial measures as important supplemental information. These statements are not guarantees of results and should not be considered as an indication of future performance. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties, including, among others, the Company’s reliance on major customers and suppliers; market acceptance of new products; uncertainty in the worldwide economic environment; successful execution of the Company’s restructuring plan and other risks detailed in Marvell’s SEC filings. When Marvell files its Form 10-Q for the third quarter of fiscal 2010, the financial statements may differ from the results disclosed in this press release because judgments and estimates that management used in preparing the financial results reported in this press release may need to be updated to the date of the filing. The Company’s results also remain subject to review by the Company’s independent registered public accounting firm. For other factors that could cause Marvell’s results to vary from expectations, please see the risk factors identified in Marvell’s latest Annual Report on Form 10-K for the year end January 31, 2009, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the SEC and other factors detailed from time to time in Marvell’s filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.

 

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Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

 

     Three Months Ended    Nine Months Ended
     October 31,
2009		     August 1,
2009		    November 1,
2008		    October 31,
2009		     November 1,
2008

Net revenue

    $ 803,098      $ 640,620    $ 791,046    $ 1,965,152      $ 2,437,696

Cost of goods sold

      341,617        288,059      379,137      887,306        1,173,892
                                    

Gross profit

      461,481        352,561      411,909      1,077,846        1,263,804

Operating expenses:

             

Research and development

      212,873        196,190      234,222      615,152        722,411

Selling and marketing

      35,442        32,907      41,158      102,260        129,080

General and administrative

      16,660        29,469      28,869      148,856        72,809

Amortization and write-off of acquired intangible assets

      26,450        26,446      34,814      83,252        105,049
                                    

Total operating expenses

      291,425        285,012      339,063      949,520        1,029,349
                                    

Operating income

      170,056        67,549      72,846      128,326        234,455

Interest and other income (expense), net

      (1,373 )      279      11,543      (1,254 )      6,097
                                    

Income before income taxes

      168,683        67,828      84,389      127,072        240,552

Provision (benefit) for income taxes

      (32,916 )      9,335      13,443      (21,563 )      28,300
                                    

Net income

    $ 201,599      $ 58,493    $ 70,946      148,635        212,252
                                    

Basic net income per share

    $ 0.32      $ 0.09    $ 0.12    $ 0.24      $ 0.35
                                    

Diluted net income per share

    $ 0.31      $ 0.09    $ 0.11    $ 0.23      $ 0.34
                                    

Shares used in computing basic earnings per share

      623,613        620,881      611,945      621,057        606,676

Shares used in computing diluted earnings per share

      659,739        648,110      630,810      647,863        630,997

 

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Marvell Technology Group Ltd.

Reconciliation of GAAP Net Income to Non-GAAP Net Income:

(Unaudited)

(In thousands, except per share amounts)

 

     Three Months Ended     Nine Months Ended  
     October 31,
2009		     August 1,
2009		     November 1,
2008		     October 31,
2009		     November 1,
2008		  

GAAP net income

    $ 201,599      $ 58,493      $ 70,946      $ 148,635      $ 212,252   

Stock-based compensation

      34,377        30,015        39,578        96,040        132,431   

Amortization and write-off of acquired intangible assets

      26,450        26,446        34,814        83,252        105,049   

Restructuring (b)

      1,919        4,956        —          15,211        —     

Legal/Tax related matters (a)

      (32,569 )      (1,202 )      —          38,229        —     

Other (b)

      —          —          —          990        —     
                                        

Non-GAAP net income

    $ 231,776      $ 118,708      $ 145,338      $ 382,357      $ 449,732   
                                        

GAAP weighted average shares - diluted

      659,739        648,110        630,810        647,863        630,997   

Non-GAAP adjustment

      4,297        3,651        1,740        2,938        168   
                                        

Non-GAAP weighted average shares diluted (c)

      664,036        651,761        632,550        650,801        631,165   
                                        

GAAP diluted net income per share

    $ 0.31      $ 0.09      $ 0.11      $ 0.23      $ 0.34   
                                        

Non-GAAP diluted net income per share

    $ 0.35      $ 0.18      $ 0.23      $ 0.59      $ 0.71   
                                        

GAAP gross profit:

    $ 461,481      $ 352,561      $ 411,909      $ 1,077,846      $ 1,263,804   

Stock-based compensation

      2,389        1,810        1,795        8,315        8,623   

Other

      —          —          —          990        —     
                                        

Non-GAAP gross profit

    $ 463,870      $ 354,371      $ 413,704      $ 1,087,151      $ 1,272,427   
                                        

GAAP gross profit as a % of revenue

      57.5 %      55.0 %      52.1 %      54.8 %      51.8 % 

Stock-based compensation

      0.3 %      0.3 %      0.2 %      0.4 %      0.4 % 

Other

      —          —          —          0.0 %      —     
                                        

Non-GAAP gross profit

      57.8 %      55.3 %      52.3 %      55.3 %      52.2 % 
                                        

GAAP research and development:

    $ 212,873      $ 196,190      $ 234,222      $ 615,152      $ 722,411   

Stock-based compensation

      (24,134 )      (22,193 )      (30,607 )      (68,064 )      (93,537 ) 

Restructuring

      (1,338 )      (3,526 )      —          (10,704 )      —     

Legal/Tax settlement

      —          1,820        —          1,820        —     
                                        

Non-GAAP research and development

    $ 187,401      $ 172,291      $ 203,615      $ 538,204      $ 628,874   
                                        

GAAP selling and marketing:

    $ 35,442      $ 32,907      $ 41,158      $ 102,260      $ 129,080   

Stock-based compensation

      (4,087 )      (3,659 )      (6,896 )      (11,457 )      (20,403 ) 

Restructuring

      (51 )      (523 )      —          (1,839 )      —     

Legal/Tax settlement

      —          659        —          659        —     
                                        

Non-GAAP selling and marketing

    $ 31,304      $ 29,384      $ 34,262      $ 89,623      $ 108,677   
                                        

GAAP general and administrative:

    $ 16,660      $ 29,469      $ 28,869      $ 148,856      $ 72,809   

Stock-based compensation

      (3,767 )      (2,353 )      (280 )      (8,204 )      (9,868 ) 

Restructuring

      (530 )      (907 )      —          (2,668 )      —     

Legal/Tax settlement

      —          158        —          (71,842 )      —     
                                        

Non-GAAP general and administrative

    $ 12,363      $ 26,367      $ 28,589      $ 66,142      $ 62,941   
                                        

GAAP provision (benefit) for income taxes:

    $ (32,916 )    $ 9,335      $ 13,443      $ (21,563 )    $ 28,300   

Tax reserve reversal

      27,317        —          —          27,317        —     

Income tax payable adjustment

      5,252        —          —          5,252        —     
                                        

Non-GAAP provision (benefit) for income taxes

    $ (347 )    $ 9,335      $ 13,443      $ 11,006      $ 28,300   
                                        

 

(a) Fiscal quarter ended October 31, 2009 includes a $27.3 million benefit as a result of the expiration of the statute of limitations related to a tax contingency reserve. In addition, a $5.3 million income tax benefit was recorded relating to the adjustment of a prior year deferred tax asset. Fiscal quarter ended August 1, 2009 includes the net impact of our payroll related settlement with the IRS on related to our historical stock option granting practices. As the composition of the settlement was different than the initial reserve, the net benefit includes a $2.6 million benefit to operating expense with an offset of $1.4 million of interest expense. The nine months ended October 31, 2009 also includes the $72 million charge taken in fiscal Q1’10 in connection with the settlement of the class action litigation.
(b) Amount represents restructuring related costs including severance costs from reductions in force, asset impairment charges and facilities consolidation charges. The nine months ended October 31, 2009 including under-utilization charges related to the rampdown of the Malaysia test operations.
(c) For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of SFAS 123R compensation costs attributable to future services and not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury method.

 

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Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

     October 31,
2009		     January 31,
2009		  

Assets

     

Current assets:

     

Cash, cash equivalents, and short-term investments

    $ 1,464,187      $ 951,909   

Accounts receivable, net

      394,319        222,101   

Inventories

      239,209        310,654   

Prepaid expenses, deferred income taxes and other current assets

      72,796        75,651   
                

Total current assets

      2,170,511        1,560,315   

Property and equipment, net

      349,276        390,853   

Long-term investments

      39,274        40,541   

Goodwill and acquired intangible assets, net

      2,201,016        2,284,164   

Other non-current assets

      127,643        138,327   
                

Total assets

    $ 4,887,720      $ 4,414,200   
                

Liabilities and Shareholders’ Equity

     

Current liabilities:

     

Accounts payable

    $ 317,233      $ 139,028   

Accrued liabilities

      201,033        175,135   

Income taxes payable

      14,671        35,803   

Deferred income

      71,273        57,895   

Current portion of capital lease obligations

      1,901        1,787   
                

Total current liabilities

      606,111        409,648   

Capital lease obligations, net of current portion

      1,011        2,451   

Other long-term liabilities

      174,298        173,034   
                

Total liabilities

      781,420        585,133   
                

Shareholders’ equity:

     

Common stock

      1,249        1,233   

Additional paid-in capital

      4,501,258        4,372,265   

Accumulated other comprehensive income (loss)

      (1,129 )      (718 ) 

Accumulated deficit

      (395,078 )      (543,713 ) 
                

Total shareholders’ equity

      4,106,300        3,829,067   
                

Total liabilities and shareholders’ equity

    $ 4,887,720      $ 4,414,200   
                

 

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Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

     Three Months Ended     Nine Months Ended  
     October 31,
2009		     November 1,
2008		     October 31,
2009		     November 1,
2008		  

Cash flows from operating activities:

         

Net income

    $ 201,599      $ 70,946      $ 148,635      $ 212,252   

Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation and amortization

      24,571        29,136        74,976        85,786   

Stock-based compensation

      34,377        39,578        96,040        132,431   

Amortization and write-off of acquired intangible assets

      26,450        34,814        83,252        105,049   

Fair market value adjustment to Intel inventory sold

      (10,807 )      (3,406 )      (13,883 )      (14,163 ) 

Excess tax benefits from stock-based compensation

      (136 )      138        (205 )      (356 ) 

Deferred income taxes

      263        —          6,131        —     

Changes in assets and liabilities, net of assets acquired and liabilities assumed in acquisitions:

         

Restricted cash

      24,500        —          24,500        (24,500 ) 

Accounts receivable

      (65,857 )      72,810        (172,218 )      (65,816 ) 

Inventories

      (17,039 )      (7,477 )      83,548        95,850   

Prepaid expenses and other assets

      (1,362 )      19,037        7,559        61,847   

Accounts payable

      38,281        (11,882 )      172,062        (6,004 ) 

Accrued liabilities and other

      (82,687 )      10,306        (13,628 )      (23,693 ) 

Accrued employee compensation

      36,123        7,664        35,149        17,659   

Income taxes payable

      (33,988 )      (5,914 )      (29,060 )      (100 ) 

Deferred income

      29,246        2,715        27,538        (4,700 ) 
                                

Net cash provided by operating activities

      203,534        258,465        530,396        571,542   

Cash flows from investing activities:

         

Purchases of investments

      (426,998 )      —          (426,998 )      (10,172 ) 

Sales and maturities of short-term and long-term investments

      10,268        5,388        10,318        29,181   

Purchases of technology licenses

      —          (1,400 )      (12,550 )      (2,650 ) 

Purchases of property and equipment

      (7,629 )      (12,780 )      (14,808 )      (59,312 ) 
                                

Net cash used in investing activities

      (424,359 )      (8,792 )      (444,038 )      (42,953 ) 

Cash flows from financing activities:

         

Proceeds from the issuance of common shares

      13,728        12,797        34,749        80,453   

Principal payments on capital lease and debt obligations

      (451 )      (101,634 )      (1,326 )      (205,039 ) 

Excess tax benefits from stock-based compensation

      136        (138 )      205        356   
                                

Net cash provided by (used in) financing activities

      13,413        (88,975 )      33,628        (124,230 ) 
                                

Net increase in cash and cash equivalents

      (207,412 )      160,698        119,986        404,359   
                                

Cash and cash equivalents at beginning of period

      1,254,807        859,309        927,409        615,648   
                                

Cash and cash equivalents at end of period

    $ 1,047,395      $ 1,020,007      $ 1,047,395      $ 1,020,007   
                                

 

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