MRVL Lowers Guidance

For Somaney's preview heading into the Marvell Technology conference call, please click here.

Marvell Technology (MRVL - commentary - Cramer's Take) announced numbers that were in line with estimates. The company said that revenue was $791 million for its October quarter, while earnings came in at 23 cents a share (including 2 cents per share in other income) vs. the 21 cents per share consensus number.

As I had expected, the company lowered guidance for the January quarter to an 8% to 13% sequential decline, which was weaker than prior guidance of a 5% to 10% quarter-over-quarter decline. The company attributed the lowered guidance to weakness in PC-related storage, WLAN/cellular and networking products. Enterprise business was weak as well, as per the company.

Management said that the company will maintain its gross-margin levels by keeping operating expenses relatively flat. This will means relative earnings stability going forward, which is why the stock is up this morning.

The company said gross margins will actually be up by 50 basis points in the fourth quarter due to operating expense declines. The company also generated $246 million in the third quarter. Another positive was the increase in storage business, with key customer Fujitsu. Finally, the company has over $1 billion in cash on its books.

On the competitive front, Qualcomm (QCOM - commentary - Cramer's Take) and Freescale Semiconductor (FSL - commentary - Cramer's Take) are ramping up pressure on Marvell's standing with Research In Motion (RIMM - commentary - Cramer's Take) and Broadcom (BRCM - commentary - Cramer's Take) in WLAN. In addition, the slowdown in the handset business overall due to the current macroeconomic headwinds is also not helping matters.

The stock is up nicely this morning despite the lowered guidance and lowered estimates across the board by the sellsiders given the cheap valuation at the moment.

If our markets can stop going down, I can see Marvell Technology a bit higher from these levels. Given the fact that it is impossible to say that the absolute bottom is in, however, consider yourself lucky if you were long going into the earnings event.

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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) and United Microelectronics (UMC - commentary - Cramer's Take). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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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.