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Marvell Technology Group Ltd. Reports First Quarter of Fiscal 2011 Results

Revenue: $856 Million, Up 2 Percent Sequentially
GAAP Net Income: $206 Million, $0.30 per share EPS
Free Cash Flow: $237 Million, 28 Percent of Revenue

SANTA CLARA, Calif., May 20, 2010 /PRNewswire via COMTEX/ --Marvell Technology Group Ltd. (Nasdaq: MRVL), a global leader in integrated silicon solutions today reported financial results for the first quarter of fiscal 2011, ended May 1, 2010.

Net revenue for the first quarter of fiscal 2011 was $856 million, a 64 percent increase from $521 million in the first quarter of fiscal 2010, ended May 2, 2009, and a 2 percent sequential increase from $843 million in the fourth quarter of fiscal 2010, ended January 30, 2010.

GAAP net income was $206 million, or $0.30 per share (diluted), for the first quarter of fiscal 2011, compared with a GAAP net loss of $111 million, or $0.18 per share (diluted), for the first quarter of fiscal 2010. GAAP net income in the fourth quarter of fiscal 2010 was $205 million, or $0.31 per share (diluted).

Non-GAAP net income was $260 million, or $0.38 per share (diluted), for the first quarter of fiscal 2011, as compared with non-GAAP net income of $32 million, or $0.05 per share (diluted), for the first quarter of fiscal 2010. Non-GAAP net income for the fourth quarter of fiscal 2010 was $266 million, or $0.40 per share (diluted).

"The results for our first quarter are another clear demonstration that the business goals we put in place over the last year are delivering positive benefits," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "Sales due to new customer programs and of new products, especially our mobile and wireless products were a significant driver of growth in the most recent quarter. We continue to believe the product development efficiency of our global workforce will enable us to deliver new products in a timely manner that will enable Marvell to grow in excess of the overall semiconductor industry."

Marvell reports net income (loss), basic and diluted net income (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 (loss) to non-GAAP net income for the three months ended May 1, 2010, January 30, 2010 and May 2, 2009 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization and write-offs of acquired intangible assets, restructuring costs and certain one-time expenses or benefits.

GAAP gross margin for the first quarter of fiscal 2011 was 59.8 percent, compared to 50.6 percent for the first quarter of fiscal 2010, and 59.7 percent for the fourth quarter of fiscal 2010.

Non-GAAP gross margin for the first quarter of fiscal 2011 was 60.6 percent, compared to 51.6 percent for the first quarter of fiscal 2010 and 60.0 percent for the fourth quarter of fiscal 2010.

Shares used to compute GAAP net income per diluted share for the first quarter of fiscal 2011 were 678 million shares, compared with 619 million shares in the first quarter of fiscal 2010 and 669 million shares in the fourth quarter of fiscal 2010. Shares used to compute non-GAAP net income per diluted share for the first quarter of fiscal 2011 were 681 million shares, compared with 637 million shares for the first quarter of fiscal 2010 and 672 million shares for the fourth quarter of fiscal 2010.

Cash flow from operations for the first quarter of fiscal 2011 was $256 million, up from the $145 million in the first quarter of fiscal 2010 and down from the $281 million reported in the fourth quarter of fiscal 2010. Free cash flow for the first quarter of fiscal 2011 was $237 million, compared to $132 million in first quarter of fiscal 2010, and down from the $253 million reported in the fourth quarter of fiscal 2010. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of IP licenses.

Conference Call

Marvell will be conducting a conference call on May 20, 2010 at 1:45 p.m. Pacific Time to discuss results for the first quarter of fiscal 2011. Interested parties may join the conference call by dialing 1-866-362-4829, pass-code 81729842. The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until June 20, 2010.

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 and also include the dilutive/antidilutive effects of common stock options and restricted stock.

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 http://www.sec.gov/ as well as on the Marvell website in the Investor Relations section at http://www.marvell.com/.

About Marvell

Marvell Technology Group Ltd. (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 term the "Company" and "Marvell" refer to Marvell Technology Group Ltd. and its subsidiaries. For more information please visit http://www.marvell.com/.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our ability to develop products efficiently and in a timely manner; our ability to grow in excess of the overall semiconductor industry; and statements concerning the Company's use of non-GAAP net income and net income per share 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 and other risks detailed in Marvell's SEC filings. When Marvell files its Form 10-Q for the first quarter of fiscal 2011, 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 the Marvell's latest Annual Report on Form 10-K for fiscal year 2010, ended January 30, 2010, 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.


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




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

                                                 Three Months Ended
                                                  ------------------
                                                       January
                                             May 1,       30,       May 2,
                                               2010      2010       2009
                                               ----      ----       ----

    Net revenue                              $855,579  $842,535  $521,434
    Cost of goods sold                        343,985   339,790   257,630
                                              -------   -------   -------
    Gross profit                              511,594   502,745   263,804
    Operating expenses:
      Research and development                219,111   213,024   206,089
      Selling and marketing                    38,423    37,144    33,910
      General and administrative               23,108    22,506   102,728
      Amortization and write-off of acquired
       intangible assets                       22,549    24,282    30,356
                                               ------    ------    ------
        Total operating expenses              303,191   296,956   373,083
                                              -------   -------   -------
    Operating income (loss)                   208,403   205,789  (109,279)
    Interest and other income (expense),
     net                                       (3,752)   10,249      (160)
                                               ------    ------      ----
    Income (loss) before income taxes         204,651   216,038  (109,439)
    Provision (benefit) for income taxes       (1,116)   11,217     2,018
                                               ------    ------     -----
    Net income (loss)                        $205,767  $204,821 $(111,457)
                                             ========  ======== =========

    Basic net income (loss) per share           $0.32     $0.32    $(0.18)
                                                =====     =====    ======
    Diluted net income (loss) per share         $0.30     $0.31    $(0.18)
                                                =====     =====    ======

    Shares used in computing basic earnings
     (loss) per share                         640,926   631,118   618,677
    Shares used in computing diluted
     earnings (loss) per share                678,059   668,623   618,677



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

                                            Three Months Ended
                                            ------------------
                                                 January
                                   May 1,          30,         May 2,
                                      2010           2010         2009
                                      ----           ----         ----

    GAAP net income (loss)                $205,767  $204,821  $(111,457)
    Stock-based compensation                26,896    30,559     31,648
    Amortization and write-off of
     acquired intangible assets             22,549    24,282     30,356
    Restructuring (a)                          586     6,452      8,336
    Legal/Tax related matters (b)            4,373         -     72,000
    Other (c)                                    -         -        990
    Non-GAAP net income                   $260,171  $266,114    $31,873
                                          ========  ========    =======

    GAAP weighted average shares -
     diluted                               678,059   668,623    618,677
      Non-GAAP adjustment                    3,310     3,598     17,928
                                             -----     -----     ------
    Non-GAAP weighted average shares
     diluted (d)                           681,369   672,221    636,605
                                           =======   =======    =======

    GAAP diluted net income (loss) per
     share                                   $0.30     $0.31     $(0.18)
                                             =====     =====     ======
    Non-GAAP diluted net income per share    $0.38     $0.40      $0.05
                                             =====     =====      =====

    GAAP gross profit:                    $511,594  $502,745   $263,804
      Stock-based compensation               2,236     2,375      4,116
      Other                                  4,373         -        990
                                             -----       ---        ---
    Non-GAAP gross profit                 $518,203  $505,120   $268,910
                                          ========  ========   ========

    GAAP gross profit as a % of revenue       59.8%     59.7%      50.6%
      Stock-based compensation                 0.3%      0.3%       0.8%
      Other                                    0.5%        -        0.2%
                                               ---       ---        ---
    Non-GAAP gross profit                     60.6%     60.0%      51.6%
                                              ====      ====       ====

    GAAP research and development:        $219,111  $213,024   $206,089
      Stock-based compensation             (18,851)  (21,702)   (21,737)
      Restructuring                           (129)   (4,342)    (5,840)
    Non-GAAP research and development     $200,131  $186,980   $178,512
                                          ========  ========   ========

    GAAP selling and marketing:            $38,423   $37,144    $33,910
      Stock-based compensation              (3,173)   (3,841)    (3,711)
      Restructuring                              -         1     (1,264)
    Non-GAAP selling and marketing         $35,250   $33,304    $28,935
                                           =======   =======    =======

    GAAP general and administrative:       $23,108   $22,506   $102,728
      Stock-based compensation              (2,636)   (2,641)    (2,084)
      Restructuring                           (457)   (2,111)    (1,232)
      Legal/Tax settlement                       -         -    (72,000)
                                               ---       ---    -------
    Non-GAAP general and administrative    $20,015   $17,754    $27,412
                                           =======   =======    =======

    (a)   Amounts represent restructuring related charges including
          severance costs from reductions in force, asset impairment
          and facilities charges.

    (b)   Fiscal quarter ended May 1, 2010 includes an amount
          representing the portion of an IP litigation settlement related
          to previous fiscal years from 2003 through 2010.  Fiscal
          quarter ended May 2, 2009 includes a $72.0 million charge in
          connection with the settlement of the class action litigation.

    (c)   For purposes of calculating non-GAAP diluted net income per
          share, the GAAP diluted weighted average shares outstanding
          is adjusted to exclude the    Fiscal quarter ended May 2, 2009
          includes underutilization charges recorded in connection with
          the rampdown of the Malaysia test operations.

    (d)   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 stock 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)



                                                                  January
                                                       May 1,        30,
    Assets                                                 2010        2010
                                                           ----        ----
    Current assets:
      Cash, cash equivalents, and short-term
       investments                                   $2,079,203  $1,796,717
      Accounts receivable, net                          448,693     356,796
      Inventories                                       206,643     241,541
      Prepaid expenses and other current assets          62,640      70,491
                                                         ------      ------
        Total current assets                          2,797,179   2,465,545
    Property and equipment, net                         340,641     342,497
    Long-term investments                                34,235      34,281
    Goodwill and acquired intangible assets,
     net                                              2,154,244   2,176,763
    Other non-current assets                            154,283     151,854
                                                        -------     -------
        Total assets                                 $5,480,582  $5,170,940
                                                     ==========  ==========

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                                 $288,568    $277,405
      Accrued liabilities                               197,398     207,877
      Income taxes payable                               18,275      19,992
      Deferred income                                    83,329      59,396
      Current portion of capital lease
       obligations                                        1,981       1,940
                                                          -----       -----
        Total current liabilities                       589,551     566,610
    Capital lease obligations, net of current
     portion                                                  -         511
    Other long-term liabilities                         191,303     185,840
                                                        -------     -------
        Total liabilities                               780,854     752,961
                                                        -------     -------

    Shareholders' equity:
      Common stock                                        1,288       1,277
      Additional paid-in capital                      4,683,490   4,607,844
      Accumulated other comprehensive loss                 (560)       (885)
      Retained earnings (accumulated deficit)            15,510    (190,257)
                                                         ------    --------
        Total shareholders' equity                    4,699,728   4,417,979
                                                      ---------   ---------
        Total liabilities and shareholders' equity   $5,480,582  $5,170,940
                                                     ==========  ==========




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

                                                          Three Months Ended
                                                            ------------------
                                                         May 1,         May 2,
                                                          2010           2009
                                                          ----           ----
    Cash flows from operating activities:
    Net income (loss)                                 $205,767      $(111,457)
    Adjustments to reconcile net income
     (loss) to net cash provided
      by operating activities:
      Depreciation and amortization                     23,078         25,375
      Stock-based compensation                          26,896         31,648
      Amortization and write-off of acquired
       intangible assets                                22,549         30,356
      Fair market value adjustment to Intel
       inventory sold                                     (942)        (1,343)
      Excess tax benefits from stock-based
       compensation                                       (185)           (29)
      Amortization of marketable securities
       premium                                           2,035              -
      Changes in assets and liabilities, net
       of assets acquired and liabilities
       assumed in acquisitions:
        Accounts receivable                            (91,897)       (63,266)
        Inventories                                     35,417        106,281
        Prepaid expenses and other assets               10,381         14,330
        Accounts payable                                 4,826         30,738
        Accrued liabilities and other                    2,298         63,455
        Accrued employee compensation                  (10,506)        13,033
        Income taxes payable                             1,941          1,343
        Deferred income                                 23,933          4,065
                                                        ------          -----
          Net cash provided by operating
           activities                                  255,591        144,529
    Cash flows from investing activities:
      Purchases of investments                        (187,878)             -
      Sales and maturities of short-term,
       long-term and equity investments                149,440              -
      Purchases of technology licenses                  (2,250)        (9,300)
      Purchases of property and equipment              (16,395)        (3,414)
                                                       -------         ------
          Net cash used in investing activities        (57,083)       (12,714)
    Cash flows from financing activities:
      Proceeds from the issuance of common
       shares                                           48,688            385
      Principal payments on capital lease
       obligations                                        (470)          (433)
      Excess tax benefits from stock-based
       compensation                                        185             29
                                                           ---            ---
          Net cash provided by (used in) financing
           activities                                   48,403            (19)
                                                        ------            ---
    Net increase in cash and cash
     equivalents                                       246,911        131,796
                                                       -------        -------
    Cash and cash equivalents at beginning
     of period                                       1,105,428        927,409
                                                     ---------        -------
    Cash and cash equivalents at end of
     period                                         $1,352,339     $1,059,205
                                                    ==========     ==========



SOURCE Marvell Technology Group Ltd.