Marvell warns of mobile revenue slide, shares dive
By Noel Randewich
SAN FRANCISCO | Thu Mar 3, 2011 5:51pm EST
(Reuters) - Marvell Technology Group (MRVL.O) warned storage and mobile revenue will fall sharply this quarter as competition heightens and PC sales stay soft, pushing its shares almost 6 percent lower after-hours.
Executives told analysts on a Thursday conference call they foresaw a plunge of more than 20 percent in mobile and wireless end-market revenue this quarter, while storage sales will slip by a mid-single digit percentage from the previous quarter.
That came after the company lagged expectations on both revenue and earnings in the fiscal fourth quarter ended January.
Investors worry that red-hot tablet sales will hurt the outlook for PCs and the chips that go in their hard drives -- a large part of its business with hard-drive maker Western Digital (WDC.N) its largest customer.
The growing popularity of tablets like Apple Inc's (AAPL.O) iPad has hit sales of PCs and the components that go in them, such as controllers for hard drives, which is a key business for Marvell.
It is now fending off intensifying competition in smartphone processors from the likes of Nvidia (NVDA.O) and Qualcomm (QCOM.O), and it supplies chips for BlackBerry-maker Research In Motion. (RIM.TO)
Hurt by concerns about soft PC sales and increasing competition, Marvell has seen its shares fall around 2 percent so far in 2011, far underperforming the Philadelphia Semiconductor Index's .SOX 13 percent gain.
GROWTH ZONES
Marvell said net profit, excluding items, in the fourth quarter was $273 million or 40 cents a share, compared with $266 million or 40 cents a share in the year-ago period. Analysts had expected fourth-quarter net profit of 42 cents a share.
Eyeing growth, the Santa Clara, California-based company has become a major player in supplying networking and storage chips for video game consoles, although that market is more seasonal and is expected to make the company's revenue more volatile.
Microsoft's (MSFT.O) Kinect motion-sensing device for the Xbox 360, launched last year, uses processors made by Marvell, a major win for the company. Retailers bought more than 8 million Kinects in 2010, well above its initial forecast of 5 million.
Marvell is also betting on China to increase its smartphone processor sales, amid concerns that Canadian customer Research In Motion faces limited long-term prospects as it competes against the likes of Apple and Google. (GOOG.O)
Last week, ASUS said its new series of smartphones for China Mobile would use Marvell's processors and WiFi/Bluetooth chips. Analysts say the company may win more customers in that region using the iPhone platform aimed at entry-level devices.
But Marvell's processors have yet to be chosen for high-profile phones beyond Research In Motion.
The company said revenue in the quarter ended in January rose 7 percent to $901 million year over year, but fell 6 percent from the prior quarter.
Analysts on average had expected Marvell to report fourth-quarter revenue of $924 million, according to Thomson Reuters I/B/E/S.
Shares of Marvell fell 5.6 percent to $17.18 in extended trading following the earnings report. The stock closed up 1.28 percent on the Nasdaq.
(Reporting by Noel Randewich; Editing by Bernard Orr, Richard Chang and Matthew Lewis)
Credit: Reuters (www.reuters.com)
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