MRVL Preview: Count On Lowered Guidance

Marvell Technology (MRVL - commentary - Cramer's Take) will report earnings for its October quarter after the close of trading today.

The Street expects earnings of 21 cents per share on $793 million in revenue for the October quarter. For the January quarter, current expectations are at 17 cents per share on revenue of $734 million. For fiscal 2009, the Street is expecting earnings of 85 cents per share on revenue of $3.18 billion. For 2010 (ending January 2010), current expectations are for earnings of 68 cents per share on revenue of $3.01 billion.

Let me make one thing clear: Marvell will lower guidance for the fourth quarter to around $700 million.

Here are some questions to bear in mind when poring over the press release and listening to the earnings call:

• How is storage doing?
• How is the company's communications business? (Remember Research In Motion (RIMM - commentary - Cramer's Take) is a large customer.)
• How is the handset business doing?
• What about enterprise demand?
• How about the PC channel?
• How are gross margins going forward?
• Are operating expenses still in the $270 million to $275 million range?
• What about WLAN? (Apple (symbol - commentary - Cramer's Take) is said to have shut down iPhone production in November to mid-December.)
• How are operational improvements coming along?

Again, the company will lower guidance for the fourth quarter and more than likely for fiscal 2010 as well if it guides that far ahead given that economic conditions are so uncertain. The stock is cheapish at current levels, however, if management leaves guidance alone, which is highly unlikely. Marvell will lower guidance for 2010, if not today then going forward.

So a cheap stock should get cheaper still down the road.

Good luck, whichever side you are playing Marvell going into earnings, good guy or dark-sider.

---

Know What You Own: Marvell Technology operates in the semiconductor industry, and some of the other stocks in its field include Taiwan Semiconductor (TSM - commentary - Cramer's Take), Broadcom (BRCM - commentary - Cramer's Take), United Microelectronics (UMC - commentary - Cramer's Take) and MEMC Electronic Materials (WFR - commentary - Cramer's Take). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

---

At the time of publication, Somaney had no positions in the stocks mentioned, although positions may change at any time without notice.

Jay Somaney is a partner and fund manager with TSG Capital Partners, a hedge fund based in Plano, Texas, and founder of GlobalTechStocks.com, a subscription site that focuses on technology and Indian stocks (including ADRs), providing information, news and chatter. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Somaney appreciates your feedback; click here to send him an email.