3 Things To Watch For In Marvell's Upcoming Earnings Report

Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Marvell Technology (NASDAQ: MRVL) is set to report its Q3 results on November 15. Last month, the company revised its guidance from $800-$850 million in revenues down to $765-$785 million. This comes after a weak Q2 report where the company missed analysts’ earnings estimates by $0.02 per share.

The earnings miss and the revised guidance has caused analysts to shrink their estimates for this quarter from an average of $0.32 all the way down to $0.20. Analysts also predict an 18.6% decline in revenue from the year ago period to $773.5 million.

Marvell’s biggest competitor, LSI (NASDAQ: LSI) released a disappointing earnings report last month. Revenue came in on the low end of its guidance of $620-$660 million at $624 million. Additionally, the company’s Q4 guidance came in well below analysts’ average estimate of $638 with a range of $570-$610 million.

LSI’s pessimism will likely carry over to Marvell’s outlook as well. Certainly, things have been rough for the company as of late. However, here are three positive things to look for in the company’s upcoming earnings report that could be a sign of good things ahead.

New CFO

When Marvell reduced its revenue guidance for the quarter, it came with the announcement that CFO Clyde Hosein will be leaving the company. Hosein has been with Marvell since 2008, and was quite liked by the investor community. It’s likely that his decision to step down was based on Marvell’s recent earnings flubs. Look for the company to name a new CFO on the conference call on Thursday.

Improved Hard Drive Pricing and Outlook

Hard disk drive components make up nearly 50% of Marvell’s revenues. The industry has seen some consolidation as of late with Western Digital (NASDAQ: WDC) acquiring Hitachi’s hard drive business and Seagate buying Samsung’s hard drive segment. Fewer competitors should help alleviate some of the pricing pressure.

Additionally, hard drives are coming back in demand as more cloud-based companies pop up. Cloud computing is expected to grow at nearly a 20% rate over the next five years. Despite lower guidance for the next quarter from Western Digital in its latest earnings report, I expect increased demand in the coming year for hard drives. More sales will also help reduce pricing pressure from hard drive manufacturers.

Faster Mobile Growth

Mobile is one of the fastest growing segments in the technology industry. Smartphone sales have grown at a 44% rate this year. Last quarter, Marvell saw 26% of its revenues come from the mobile computing industry. Look for that number to increase with the rapid growth in mobile.

The biggest prospect for mobile growth comes in the company’s TD platform – a low cost wireless solution targeted toward developing countries such as China. Working with companies such as Motorola and Samsung, the company has helped phone manufacturers achieve an unsubsidized price point of $100 for TD smartphones.

 An underwhelming earnings report may scare off short-term investors. A rush to sell at the slightest hint of pessimism for the upcoming quarter could result in a great buying opportunity for long-term investors. Keep an eye out for the three things I mentioned in this article, and if the bears rush in, buy a few shares when they go on sale.


adamlevy has no positions in the stocks mentioned above. The Motley Fool owns shares of Western Digital. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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