Investopedia: Marvell Bottoms Out

The Street reacted very favorably to Marvell Technology's (Nasdaq:MRVL) first quarter earnings report. Actually, it wasn't the quarterly earnings that anybody cared about, it was the stronger guidance for the next quarter and the evidence that business may have bottomed out. Although there are still some cosmetic risks to the Marvell story in addition to the fact that Wall Street appears to be re-warming to the name, investors may still be able to pick up shares here and look at the price as a bargain. 

A Tough Start to the Year
Nobody expected Marvell to have a good first quarter, and Marvell obliged with a pretty pungent set of results. Revenue fell 6% from the year-ago first quarter and 11% from the prior quarter, led by a 30% sequential drop in sales from chips for the mobile and wireless markets. Hard drive controller chip sales also slipped (down 1% sequentially), while networking sales rose 4% (but contributed less than 25% of total sales).

As is pretty typical for tech companies, operating leverage cuts both ways and revenue declines turned into even bigger drops in profitability. Gross margin retreated about 40 basis points from the January quarter (and a point and a half from the year-ago level), and operating margin dropped more than five full points, as operating income fell close to 30% on both an annual and sequential basis.



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