Updated from 4:35 p.m. EDT

Communications chipmaker

Marvell

(MRVL) - Get Report

swung to a profit in its fiscal second quarter and bested analysts' expectations on the top and bottom line.

As an extra kicker, Marvell offered Wall Street upside on guidance for both the third quarter and full 2004 fiscal year. It was enough to elicit a slew of '90s-era "good quarter, guys" backslaps from analysts in the follow-up conference call Q&A session.

But it's hard to quibble with growth, at a time when it's in short supply. The latest quarter makes the seventh in a row that Marvell has squeezed out double-digit growth, points out Legg Mason's Cody Acree, who has a buy rating on the stock. His firm has no banking relations with Marvell.

Based on the after-hours price and estimated earnings of $1.35 in fiscal year 2005, the stock now changes hands at a multiple in the high 20s. "That's not out of line with most of the higher-quality semi names, and in many cases that's below," says Acree. Other chip companies might consider themselves extremely lucky to post growth rates in the 20% range -- but if Marvell meets its 2004 guidance, it will have cranked out growth of around 60%, he points out. "I think it deserves a premium multiple, and today you could argue it's trading at a discount to slower-growing companies," says Acree.

After hours, shares rose $1.64 or 4.3% to $40. In regular trading the stock was little changed, declining 3 cents or 0.08% to $38.36.

Revenue of $192.9 million was up 61% from the same quarter a year ago and above the consensus estimate for $185.9 million.

Sales were up 15% from the prior quarter, above the company's guidance for an improvement of 10% to 12%. Gross margin totaled 53.9%, in line with guidance.

Net income totaled $9.4 million or 7 cents a share, compared with a net loss of $9.3 million a year earlier.

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On a pro forma basis, earnings totaled 22 cents a share, a penny above expectations. The pro forma number excludes a charge of $19.6 million for amortization of acquired intangible assets and a charge of $1.0 million for amortization of stock-based compensation.

CEO Sehat Sutardja said he was "very pleased" by today's results, citing strength in both Marvell's business lines of data storage and communications. Marvell draws just over half of its revenue from storage products, which made up 56% of its total sales in fiscal year 2003. Broadband chips, a steadily increasing portion of the pie, accounted for 44%.

For the third quarter Marvell said sequential sales are likely to rise 10%, with gross margins of about 53%. Given the company already beat sales expectations in the just-ended quarter, that means sequential revenues should reach about $212.2 million -- above Wall Street's predictions for $200.7 million.

Also today, Marvell issued a revenue outlook for fiscal year 2004 with a midpoint 6% above the consensus estimate. Marvell's guidance calls for sale of between $805 million and $825 million, compared with analysts' expectations for $770 million.

CFO George Hervey said the midpoint of the guidance reflects 62% growth from last year's levels. Gross margin is expected to be above the long-term model of 52% but below the latest quarter's nearly 54%.

Despite Marvell's own solid quarter, management stuck to the same script as the vast majority of other tech CEOs on recent profit reports -- all of whom have scrupulously refrained from outright bullishness. "We're not going to buck the trend of

issuing cautious optimism on general economic conditions," said Sutardja on the conference call.

Among the factors aiding its own strong growth of late, Marvell has a deal with

Western Digital

(WDC) - Get Report

, one of the largest disk drive makers, which is transitioning to Marvell's silicon almost exclusively across its platform, points out Legg Mason's Acree.

Also, Marvell owns about three quarters of the market for disk drives in laptop notebooks, which have lately sold like hotcakes (H-P reported earlier this week that unit shipments of notebooks rose 54%). Plus, Marvell is benefiting from the transition to a faster speed of Ethernet known as Gigabit Ethernet.

"So it's more a matter for them of markets transitioning to new technology than just counting on PC growth, though PCs are growing nicely as well now," sums up Acree.