Marvell Technology Group Ltd. Reports Fiscal Second Quarter Results

Revenue: $640.6 Million, Up 23 Percent Sequentially

GAAP Net Income: $58.5 Million, $0.09 per share EPS

Free Cash Flow: $175.3 Million, 27 Percent of Revenues

SANTA CLARA, Calif., Aug. 27 /PRNewswire-FirstCall/ -- Marvell Technology Group Ltd. (Nasdaq: MRVL), a world leader in storage, communications and consumer silicon solutions, today reported financial results for the second quarter of fiscal 2010, ended August 1, 2009.

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Net revenue for the second quarter of fiscal 2010 was $640.6 million, a 23 percent sequential increase from $521.4 million in the first quarter of fiscal 2010, ended May 2, 2009 and a 24 percent decrease from $842.6 million in the second quarter of fiscal 2009, ended August 2, 2008.

GAAP net income was $58.5 million, or $0.09 per share (diluted), for the second quarter of fiscal 2010, as compared to a GAAP net loss of $111.5 million, or $0.18 per share (diluted), for the first quarter of fiscal 2010. For the second quarter of fiscal 2009 GAAP net income was $71.4 million, or $0.11 per share (diluted).

Non-GAAP net income was $118.7 million, or $0.18 per share (diluted), for the second quarter of fiscal 2010, an increase of 272 percent from non-GAAP net income of $31.9 million, or $0.05 per share (diluted), for the first quarter of fiscal 2010, and a 23 percent decrease compared with non-GAAP net income of $154.0 million, or $0.24 per share (diluted), for the second quarter of fiscal 2009.

"We are pleased with the results reported for the second quarter of fiscal 2010," said Dr. Sehat Sutardja, Marvell Chairman and Chief Executive Officer. "Our sequential revenue growth reflects both an improving economy and the acceptance by customers of our new and existing products. Additionally, the financial discipline we have adopted continued to deliver positive benefits during the second quarter, allowing us to achieve our long-term profitability and cash flow targets well ahead of schedule."

Marvell reports net income or loss, basic and diluted net income or loss per share in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income or loss to non-GAAP net income for the three months ended August 1, 2009, May 2, 2009 and August 2, 2008, respectively, appear in the financial statements below.

GAAP gross margin for the second quarter of fiscal 2010 was 55.0 percent, compared to 50.6 percent for the first quarter of fiscal 2010 and 51.8 percent for the second quarter of fiscal 2009. Non-GAAP gross margin for the second quarter of fiscal 2010 increased to 55.3 percent, compared to 51.6 percent for the first quarter of fiscal 2010 and 52.3 percent for the second quarter of fiscal 2009.

Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2010 were 648 million shares, compared with 619 million shares in the first quarter of fiscal 2010 and 638 million shares in the second quarter of fiscal 2009. Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2010 were 652 million shares, compared with 637 million shares for the first quarter of fiscal 2010 and 640 million shares for the second quarter of fiscal 2009.

Cash flow from operations for the second quarter of fiscal 2010 was $182.3 million, up 26 percent sequentially from $144.5 million reported in the first quarter of fiscal 2010 and down less than one percent from $182.9 million in the second quarter of fiscal 2009. Free cash flow, defined as cash flow from operations less capital expenditures and purchases of IP licenses, was $175.3 million, up 33 percent sequentially from $131.8 million in the first quarter of fiscal 2010 and up 6 percent from $165.6 million in the second quarter of fiscal 2009.

Conference Call

Marvell will be conducting a conference call on August 27, 2009 at 1:45 p.m. PDT to discuss results for the second quarter ended August 1, 2009. Interested parties may dial-in to the conference call at 1-800-510-9661, pass-code 55940109. The call is being webcast by ThomsonReuters and can be accessed at Marvell's website under the Investor Events section of the Investor Relations page at http://www.marvell.com/investors/events.jsp. Replay on the internet will be available following the call until September 24, 2009.

Discussion of Non-GAAP Financial Measures

Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP earnings per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP earnings per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of compensation costs expected to be incurred in future periods, but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Marvell believes that the presentation of non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to Marvell's financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell's Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC's website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.

About Marvell

Marvell Technology (NASDAQ: MRVL) is a global leader in the development of storage, communications and consumer silicon solutions. Marvell's diverse product portfolio includes switching, transceiver, communications controller, wireless, and storage solutions that power the entire communications infrastructure, including enterprise, metro, home, and storage networking. As used in this release, the terms "Company" and "Marvell" refer to Marvell Technology Group Ltd. and its subsidiaries. For more information visit www.marvell.com

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the Company's expectations regarding the economy and acceptance by customers of the Company's new and existing products; and statements concerning the Company's use of non-GAAP financial measures as important supplemental information. These statements are not guarantees of results and should not be considered as an indication of future performance. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties, including, among others, the Company's reliance on major customers and suppliers; market acceptance of new products; uncertainty in the worldwide economic environment; successful execution of the Company's restructuring plan and other risks detailed in Marvell's SEC filings. When Marvell files its Form 10-Q for the second quarter of fiscal 2010, the financial statements may differ from the results disclosed in this press release because judgments and estimates that management used in preparing the financial results reported in this press release may need to be updated to the date of the filing. The Company's results also remain subject to review by the Company's independent registered public accounting firm. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's latest Annual Report on Form 10-K for the year end January 31, 2009, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the SEC and other factors detailed from time to time in Marvell's filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.

                            Marvell Technology Group Ltd.
                   Condensed Consolidated Statements of Operations
                                    (Unaudited)
                     (In thousands, except per share amounts)

                                 Three Months Ended        Six Months Ended
                                 ------------------        ----------------
                         August 1,   May 2,   August 2,   August 1,  August 2,
                           2009       2009      2008        2009       2008
                           ----       ----      ----        ----       ----

    Net revenue          $640,620  $521,434   $842,575  $1,162,054  $1,646,650
    Cost of goods
     sold                 288,059   257,630    405,913     545,689     794,755
                          -------   -------    -------     -------     -------
    Gross profit          352,561   263,804    436,662     616,365     851,895
    Operating
     expenses:
      Research and
       development        192,664   200,249    249,714     392,913     488,189
      Selling and
       marketing           32,384    32,646     41,834      65,030      87,922
      General and
       administrative      28,562   101,496     30,989     130,058      43,940
      Amortization and
       write-off of
       acquired
       intangible
       assets              26,446    30,356     34,988      56,802      70,235
      Restructuring         4,956     8,336          -      13,292           -
                            -----     -----          -      ------      ------
        Total
         operating
         expenses         285,012   373,083    357,525     658,095     690,286
                          -------   -------    -------     -------     -------
    Operating income
     (loss)                67,549  (109,279)    79,137     (41,730)    161,609
    Interest and other
     income (expense),
     net                      279      (160)      (754)        119     (5,446)
                              ---      ----       ----         ---      ------
    Income (loss)
     before income
     taxes                 67,828  (109,439)    78,383     (41,611)    156,163
    Provision for
     income taxes           9,335     2,018      7,016      11,353      14,857
                            -----     -----      -----      ------      ------
    Net income (loss)     $58,493 $(111,457)   $71,367     (52,964)    141,306
                          ======= =========    =======     =======     =======

    Basic net income
     (loss)  per share      $0.09    $(0.18)     $0.12      $(0.09)      $0.23
                            =====    ======      =====      ======       =====
    Diluted net income
     (loss) per share       $0.09    $(0.18)     $0.11      $(0.09)      $0.22
                            =====    ======      =====      ======       =====

    Shares used in
     computing basic
     earnings per
     share                620,881   618,677    606,860     619,779     604,041
    Shares used in
     computing
     diluted
     earnings per
     share                648,110   618,677    637,832     619,779     631,091



                            Marvell Technology Group Ltd.
                       Reconciliation of Non-GAAP Adjustments
                                     (Unaudited)
                      (In thousands, except per share amounts)

       Reconciliation of GAAP net income (loss) to non-GAAP net income:

                            Three Months Ended          Six Months Ended
                            ------------------          ----------------
                      August 1,    May 2,  August 2,   August 1,  August 2,
                        2009        2009     2008        2009       2008
                        ----        ----     ----        ----       ----

    GAAP net
     income
     (loss)            $58,493  $(111,457)   $71,367   $(52,964)  $141,306
    Stock-based
     compensation       30,015     31,648     47,627     61,663     92,853
    Amortization
     and write-
     off of
     acquired
     intangible
     assets             26,446     30,356     34,988     56,802     70,235
    Restructuring        4,956      8,336          -     13,292          -
    Legal/Tax
     settlements
     (a)                (1,202)    72,000          -     70,798          -
    Other (a)                -        990          -        990          -
                           ---        ---        ---        ---        ---
    Non-GAAP net
     income           $118,708    $31,873   $153,982   $150,581   $304,394
                      ========    =======   ========   ========   ========

    GAAP
     weighted
     average
     shares -
     diluted           648,110    618,677    637,832    619,779    631,091
      Non-GAAP
       adjustment        3,651     17,928      2,315     24,404      1,203
                         -----     ------      -----     ------      -----
    Non-GAAP
     weighted
     average
     shares
     diluted (b)       651,761    636,605    640,147    644,183    632,294
                       =======    =======    =======    =======    =======

    GAAP diluted
     net income
     (loss) per
     share               $0.09     $(0.18)     $0.11     $(0.09)     $0.22
                         =====     ======      =====     ======      =====
    Non-GAAP
     diluted net
     income per
     share               $0.18      $0.05      $0.24      $0.23      $0.48
                         =====      =====      =====      =====      =====

    GAAP gross
     profit:          $352,561   $263,804   $436,662   $616,365   $851,895
      Stock-based
       compensation      1,810      4,116      3,755      5,926      6,828
      Other
       (a)                   -        990          -        990          -
                           ---        ---        ---        ---        ---
    Non-GAAP gross
     profit           $354,371   $268,910   $440,417   $623,281   $858,723
                      ========   ========   ========   ========   ========

    GAAP gross
     profit as a
     % of revenue         55.0%      50.6%      51.8%      53.0%      51.7%
      Stock-based
       compensation        0.3%       0.8%       0.5%       0.5%       0.4%
      Other
       (a)                   -        0.2%         -        0.1%         -
                           ---        ---        ---        ---        ---
    Non-GAAP gross
     profit               55.3%      51.6%      52.3%      53.6%      52.1%
                          ====       ====       ====       ====       ====

    GAAP research
     and
     development:     $192,664   $200,249   $249,714   $392,913   $488,189
      Stock-based
       compensation    (22,193)   (21,737)   (32,998)   (43,930)   (62,930)
      Payroll
       tax
       penalty           1,820          -          -      1,820          -
                         -----        ---        ---      -----        ---
    Non-GAAP
     research
     and
     development      $172,291   $178,512   $216,716   $350,803   $425,259
                      ========   ========   ========   ========   ========

    GAAP
     selling
     and
     marketing:        $32,384    $32,646    $41,834    $65,030    $87,922
      Stock-based
       compensation     (3,659)    (3,711)    (6,159)    (7,370)   (13,507)
      Payroll
       tax
       penalty             659          -          -        659          -
                           ---        ---        ---        ---        ---
    Non-GAAP
     selling
     and
     marketing         $29,384    $28,935    $35,675    $58,319    $74,415
                       =======    =======    =======    =======    =======

    GAAP general and
     administrative:   $28,562   $101,496    $30,989   $130,058    $43,940
      Stock-based
       compensation     (2,353)    (2,084)    (4,715)    (4,437)    (9,588)
      Legal
       settlement            -    (72,000)         -    (72,000)         -
      Payroll
       tax
       penalty             158          -          -        158          -
                           ---        ---        ---        ---        ---
    Non-GAAP general
     And
     administrative    $26,367    $27,412    $26,274    $53,779    $34,352
                       =======    =======    =======    =======    =======

    (a)  Fiscal quarter ended August 1, 2009 includes the net impact of our
         settlement with the IRS related to our historical stock option
         granting practices.  As the composition of the settlement was
         different than the initial reserve, the net benefit includes a $2.6
         million benefit to operating expense with an offset of $1.4 million
         of interest expense.  Fiscal quarter ended May 2, 2009 includes a
         $72.0 million charge recorded in connection with the settlement of a
         class action securities litigation and $990K of underutilization
         charges recorded in connection with the rampdown of the Malaysia test
         operations.

    (b)  For purposes of calculating non-GAAP diluted net income per share,
         the GAAP diluted weighted average shares outstanding is adjusted to
         exclude the benefits of SFAS 123R compensation costs attributable to
         future services and not yet recognized in the financial statements
         that are treated as proceeds assumed to be used to repurchase shares
         under the GAAP treasury method.



               Marvell Technology Group Ltd.
           Condensed Consolidated Balance Sheets
                        (Unaudited)
                      (In thousands)

                               August 1,  January 31,
    Assets                          2009         2009
                                    ----         ----
    Current assets:
      Cash, cash
       equivalents, and short-
       term investments       $1,279,307     $951,909
      Accounts receivable,
       net                       328,462      222,101
      Inventories                211,383      310,654
      Prepaid expenses,
       deferred income taxes
       and other current
       assets                     70,770       75,651
                                  ------       ------
        Total current assets   1,889,922    1,560,315
    Property and equipment,
     net                         352,719      390,853
    Long-term investments         39,333       40,541
    Goodwill and acquired
     intangible assets, net    2,227,440    2,284,164
    Other non-current assets     132,117      138,327
                                 -------      -------
        Total assets          $4,641,531   $4,414,200
                              ==========   ==========

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable          $268,541     $139,028
      Accrued liabilities        248,122      175,135
      Income taxes payable        48,554       35,803
      Deferred income             42,027       57,895
      Current portion of
       capital lease
       obligations                 1,862        1,787
                                   -----        -----
        Total current
         liabilities             609,106      409,648
    Capital lease
     obligations, net of
     current portion               1,501        2,451
    Other long-term
     liabilities                 173,852      173,034
                                 -------      -------
        Total liabilities        784,459      585,133
                                 -------      -------

    Shareholders' equity:
      Common stock                 1,245        1,233
      Additional paid-in
       capital                 4,453,177    4,372,265
      Accumulated other
       comprehensive income
       (loss)                       (673)        (718)
      Accumulated deficit       (596,677)    (543,713)
                                --------     --------
        Total shareholders'
         equity                3,857,072    3,829,067
                               ---------    ---------
        Total liabilities
         and shareholders'
         equity               $4,641,531   $4,414,200
                              ==========   ==========



                     Marvell Technology Group Ltd.
            Condensed Consolidated Statements of Cash Flows
                              (Unaudited)
                             (in thousands)

                        Three Months Ended      Six Months Ended
                        ------------------      ----------------
                        August 1,  August 2,   August 1,  August 2,
                            2009       2008        2009       2008
                            ----       ----        ----       ----
    Cash flows from
     operating activities:
    Net income (loss)    $58,493    $71,367    $(52,964)  $141,306
    Adjustments to
     reconcile net
     income (loss)
     to net cash
     provided by
     operating
     activities:
      Depreciation
       and
       amortization       25,030     28,032      50,405     56,650
      Stock-based
       compensation       30,015     47,627      61,663     92,853
      Amortization
       and write-off
       of acquired
       intangible
       assets             26,446     34,988      56,802     70,235
      Fair market
       value
       adjustment to
       Intel
       inventory sold     (1,733)    (4,374)     (3,076)   (10,757)
      Net impact of
       derivative
       contracts          (1,302)         -        (827)         -
      Excess tax
       benefits from
       stock-based
       compensation          (40)      (325)        (69)      (494)
      Deferred
       income taxes        5,868          -       5,868          -
      Changes in assets
      and liabilities,
      net of assets
      acquired and
      liabilities
      assumed in
      acquisitions:
        Restricted
         cash                  -          -           -    (24,500)
        Accounts
         receivable      (43,095)  (100,474)   (106,361)  (138,626)
        Inventories       (5,694)    47,409     100,587    103,327
        Prepaid
         expenses and
         other assets     (4,582)    10,344       9,748     42,810
        Accounts
         payable         103,043     68,954     133,781      5,878
        Accrued
         liabilities
         and other         6,079    (15,192)     69,059    (33,999)
        Accrued
         employee
         compensation    (14,007)    (6,968)       (974)     9,995
        Income taxes
         payable           3,585       (842)      4,928      5,814
        Deferred
         income           (5,773)     2,338      (1,708)    (7,415)
                          ------      -----      ------     ------
          Net cash
           provided
           by
           operating
           activities    182,333    182,884     326,862    313,077
    Cash flows from
     Investing
     activities:
      Purchases of
       investments             -        (46)          -    (10,172)
      Sales and
       maturities of
       short-term and
       long-term
       investments            50          -          50     23,793
      Purchases of
       technology
       licenses           (3,250)    (1,250)    (12,550)    (1,250)
      Purchases of
       property and
       equipment          (3,765)   (16,010)     (7,179)   (46,532)
                          ------    -------      ------    -------
          Net cash
           used in
           investing
           activities     (6,965)   (17,306)    (19,679)   (34,161)
    Cash flows from
     financing activities:
      Proceeds from
       the issuance
       of common
       shares             20,636     50,602      21,021     67,656
      Principal
       payments on
       capital lease
       and debt
       obligations          (442)  (101,280)       (875)  (103,405)
      Excess tax
       benefits from
       stock-based
       compensation           40        325          69        494
                              --        ---          --        ---
          Net cash
           provided
           by (used
           in)
           financing
           activities     20,234    (50,353)     20,215    (35,255)
                          ------    -------      ------    -------
    Net increase in
     cash and cash
     equivalents         195,602    115,225     327,398    243,661
                         -------    -------     -------    -------
    Cash and cash
     equivalents at
     beginning of
     period            1,059,205    744,084     927,409    615,648
                       ---------    -------     -------    -------
    Cash and cash
     equivalents at
     end of period    $1,254,807   $859,309  $1,254,807   $859,309
                      ==========   ========  ==========   ========


    For further information, contact:
    Jeff Palmer                           Tom Hayes
    Investor Relations                    Corporate Communications
    408-222-8373                          408-222-2815
    jpalmer@marvell.com                   tom@marvell.com

SOURCE Marvell Technology Group Ltd.