Friedman Billings notes last night Marvell reported fiscal 4Q09 financial results that were better than expected, as in-line revs and slightly worse-than-expected gross margins were more than fully offset by better-than-expected operating expense spending reductions.
Further cost benefits remain from Marvell's recently enacted 15% headcount cut. Calendar 1Q09 rev guidance of $490-530 mln was eight points better than the consensus est. End-mkt commentary was very limited, and they suspect Marvell's cellular business will fare worse in 1Q than its storage, enterprise, or Wi-Fi business segments, as initial Blackberry Bold (RIMM) build rates decline and as the firm's applications processor business is pressured.
Firm raises their tgt to $11 from $10.50. Firm likes MRVL for a move towards $10 given (1) hard drive share gains in 2H09 and 2010 in client and enterprise drives; (2) may capitalize on a reduced competitive environment for cellular chips in the coming years; and (3) valuation seems attractive at a forward P/E of 11x and 1.6x EV/S.
Oppenheimer notes opex was again a highlight, with spending down $31 mln seq. to $235 mln, well below guidance of $255-265 mln. While MRVL admittedly had more fat to trim than most, firm commends mgmt for having the courage to right-size the business in the face of a new demand reality.
They believe Feb orders improved M/M, consistent with peer commentary at Opco's recent Vail conf.
Visibility remains compromised, however, and their checks in Asia suggest current orders are largely inventory restocking. Inventory days are elevated, but given MRVL's sole-source status on the majority of its sockets, they believe inventory/pricing risk is relatively muted.
While demand headwinds will likely persist through much of 2009, they believe risk/reward remains favorable at current levels given MRVL's opex discipline, strong balance sheet and attractive long-term product cycles. Firm raises their tgt to $12 from $10.