4 Key Takeaways From Marvell Technology's Q1 Results

Marvell announced its delayed first-quarter (April 2016 quarter end) results and expects to file its final delayed 10-Q "very shortly."

The first quarter revenue/non GAAP EPS of $541 million/$0.01 (ex. SBC) was below the Street at $574 million/$0.07. On a sequential basis, revenue was down 16 percent in storage (due to HDDs), down 29 percent in mobile and up 5 percent in networking.

Related Link: Marvel Results Strong Under New Management, Says Brean

For the second quarter, the company expects revenue/EPS of $625 million–$635 million/$0.10–$0.12, which is above the Street at $586 million/$0.09. Gross margin guidance of 52–54 percent also topped consensus estimate of 52.1 percent. "Note that second quarter which Marvell guided to is the July quarter and ends this week," Goldman Sachs added.

Ratings Suspended, Justification

Following are the four key takeaways of Goldman Sachs from the results:

1. Storage: 45 percent of revenue; Marvell guided up about 20 percent quarter-over-quarter in the second quarter "from a very low base."
2. HDD Controller Sales: "[T]his implies that HDD controller sales are likely down mid- to high single digits yoy and back in line with HDD industry production levels. Marvell's storage business is primarily HDD controllers, and improving in SSDs will be key for unit growth," analyst Mark Delaney wrote in a note.
3. Networking: 25 percent of sales; Delaney said, "Marvell saw some improvement in networking, partly on traditional enterprise and in part on growth in datacenter."
4. Mobile – Connectivity: 17 percent of sales; "down about 20 percent year-over-year and is now more tied to applications such as access points and game consoles (which could see second half seasonality)."

Goldman is Rating Suspended on Marvell.

Shares of Marvell closed Wednesday's regular trading at $11.67. In the pre-market hours on Thursday, they gained about 8 percent to $12.60. At time of publication, however, Marvell had retreated slightly and was seen up just 2.83 percent into the pre-market session at $12.00.

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