Looking Beyond Marvell Technology's Weak Performance

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Dec 03, 2014

Marvell Technology (MRVL, Financial) reported disappointing results for the third quarter. The company fell short of analysts’ revenue estimates. However, the earnings came in line with estimates. The reason behind the decline in Marvell’s performance was a weaker mobile business and lower revenue from its networking business. The company is now working on getting over its weaknesses. Marvell is also focused on tight operational management. This is expected to improve its margins in the future.

Bright opportunities

Marvell is, however, seeing some bright opportunities for a turnaround. For example, Verizon (VZ, Financial) has recently launched its LTE ready self-branded Ellipsis 8 tablet in North America, which is running on Marvell's technology, and is seeing good traction in the market. Further, China’s leading consumer brand, Meizu, has introduced its high end flagship MX4 Pro smartphone for China Mobile (CHL, Financial) based on Marvell's chips. In addition, Marvell also has seen many important design wins with global tier-1 OEMs for smartphones and tablets. This is expected to drive Marvell’s sales in the coming quarters.

Besides these, Marvell has also brought some new and exciting products to its product pipeline. According to management, Marvell has recently introduced new products, including "the 64-bit quad core ARMADA Mobile PXA1908 and 64-bit octacore ARMADA PXA1936. Many tier-1 customers in Korea and China will introduce smartphones using these solutions in the first half of next year." This gives Marvell good opportunity to increase its revenue.

In addition, in response to the lower mobile revenue in the past, Marvell is mainly focusing on accelerating the introduction of its turnkey LTE platforms. With this, Marvell will be targeting other potential markets. Besides this, Marvell is also expanding its LTE solutions outside China. Marvell is focusing on bringing its turnkey platforms to this market in order to benefit from LTE growth.

Wireless is growing

Marvell is seeing good traction for its wireless connectivity business. Since customers are attracted toward its high end technology, it is working on the same. For instance, its 4x4 11ac device is doing well in carrier grade access point, supporting Tier-1 customers such as Cisco (CSCO, Financial). Seeing this momentum, Marvell is geared up to expand it into high performance 4x4 MIMO product category. The gaming segment looks profitable for Marvell as well, as the company is making the most of its leading solutions in this segment with Microsoft (MSFT, Financial) and Sony (SNE, Financial).

Marvell is also seeing significant growth potential in the IoT market. To support this, Marvell is busy in making general purpose micro controllers with integrated wireless connectivity. Marvell is pleased with the way people are receiving its EZ-connect wireless micro-controllers. This will strengthen Marvell’s long term growth prospects, and the company can gain significant market share as a result.

Conclusion

Despite some weakness in the mobile market, Marvell is still capable of growing in the long run. The company will benefit from the growth of various technologies, making it a smart long-term investment.