Is Marvell Technology Un-Investible? Here's Why FBR Thinks So

• Shares of Marvell Technology Group Ltd. MRVL have been trending south in 2015 and are down 47 percent year-to-date.
• FBR’s Christopher Rolland maintained a Market Perform rating on the company, with a price target of $11.
• In the absence of an auditor, the company’s financials remain unqualified and this makes the stock un-investible, Rolland stated.

Marvell Technology updated the preliminary financial results for F2Q16 with top line in-line with its guidance and pro forma EPS benefitting from reduced R&D and S&A expenses.

The company also reported worse-than-expected preliminary results for F3Q16, with weak top line due to a 16 percent q/q decline in its storage IC sales and a higher-than-expected decline in HDD SoC sales.

Analyst Christopher Rolland noted that these results are unaudited and that until the company issues qualified financials and displays signs of core stabilization, the story is likely to remain ”un-investible” for most potential investors.

Rolland expressed concern regarding the company’s controls and revenue recognition policy, terming it as a “potentially serious irregularity that has often haunted the chip industry in decades prior.”

Marvell Technology has been questioning the use of “pull-in” accounting and, while releasing preliminary F2Q16 results, included some revenues that should most likely have been recognized in the following quarter. “We note the audit committee investigation has expanded to include F4Q15, F1Q16, and F2Q16,” the FBR report mentioned.