MRVL: Marvell Technology Investors Believe No News is Good News

February 27, 2007 by Douglas A. McIntyre

By William Trent, CFA of Stock Market Beat

If ever there was an earnings report to prove the “no news is good news” thesis it Marvell Technology Group Ltd. (MRVL) Reports Preliminary Revenue for Fourth Quarter and Full Fiscal 2007: Financial News – Yahoo! Finance, which sent the shares up more than five percent in after-hours trading:

Net revenue for the fourth quarter of fiscal 2007 was $622.0 million, an increase of 27% over net revenue of $489.0 million for the fourth quarter of fiscal 2006 and a 20% sequential increase from net revenue of $520.4 million for the third quarter of fiscal 2007. Net revenue for fiscal 2007 was $2,237.6 million, an increase of 34% over net revenue of $1,670.3 million in fiscal 2006.All results reported are preliminary because Marvell is in the midst of a previously announced internal review by a special committee of its Board of Directors relating to the Company’s historical stock option practices and related accounting matters.

And that was pretty much it. Due to the aforementioned accounting matters, there were no financial statements presented, leaving investors with the April 2006 balance sheet as the most recent. There was no accounting for operating income, expenses or net income. There was no disclosure of inventory levels, though there would be nothing much to which to compare them had there been one.

The one financial statistic reported was not enough to send the shares soaring. Revenue estimates were for $625 million, so the $622 was a little low. On the conference call, according to MarketWatch, “For the current business period, Marvell Tech forecast total sales in the range of $640 million to $650 million, a bit softer than Wall Street’s expectations of $651.4 million.” Perhaps investors felt it was close enough for government work?

But we jest. In reality, the key comment from Marvel was this one (source: the MarketWatch article):

Marvell Tech said inventory levels at its data-storage customers stabilized during the quarter. It added that its inventories should be back at normal levels by April.

We don’t know how they deduce this, nor whether the channel inventories so mentioned will have any bearing on Marvel’s own inventory levels and sales potential. But the mere hint that inventories are being reduced, despite the fact that all signs suggest otherwise, was enough to spark a rally. At least for one night.

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