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Buy Brocade and Broadcom, Hold Marvell Technologies


Even more impressive was that in an environment where rivals Cisco and HP have issued less-than-favorable guidance, Broadcom expects its third-quarter revenue to be between $2 billion and $2.15 billion. On average, analysts are forecasting revenue of $2.11 billion.

So with Apple's highly anticipated iPhone 5 launch right around the corner, I think Broadcom should easily exceed these figures as Apple products represent over 10% of Broadcom's revenue. It would be wise to add Broadcom shares ahead of the iPhone launch, rumored to be Sept. 12 .

The other company we are going to look at is Marvell Technologies (MRVL), which is also due to announce its second-quarter earnings on Thursday after the bell. Analysts are expecting the company to report earnings per share of 27 cents on revenue of $855.01 million. I don't expect much of a surprise here as the company has also either met or exceeded analysts' expectations over the past four quarters.

In a space dominated by the likes of Qualcomm (QCOM), Texas Instruments (TXN) and ARM Holdings (ARMH), the question is whether Marvell inspires the same level of confidence, especially when one can make the case that the stock is expensive, trading at a much higher multiple than Intel's (INTC) P/E of 11.

This is the challenge Marvell's management has to overcome. Looking at its recent earnings one can see that its full year-on-year comparisons were impressive.

Unfortunately for the company, the company's revenue growth showed a slight decline. From that standpoint, it is hard to make the case that Marvell is anything but fairly valued at current levels. Then again, when has that ever mattered?

What's more, although the company does have some challenges ahead, it seems its management is in tune with these challenges and is prepared to address them and get the company back on track. I am willing to give the company the benefit of the doubt here and will recommend it as a hold ahead of the report pending better-than-expected guidance.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.

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