Summary on 8/29:
Marvell is in 5G secular trend, 2H will be driven baseband’s products to Nokia and processors customized for massive MIMO applications to Samsung and storage segment is driven by PS5 gaming console and better than expected PC market and ten years a time iPhone upgrade cycle. However, I don’t think Marvell is attractive now. With a forward PE ratio as 33.3x on 8/28 CNBC data and TTM PE ratio as 52.4x compare to other competitors as below.
Cited the following paragraph from TrendForce : “NAND Flash suppliers’ revenue performances during this quarter (3Q20) are expected to benefit from the following positive drivers: (1) the increasing tenders for Chromebooks, (2) the stock-up activities related to the next iPhone series, and (3) the SSD demand related to the upcoming game consoles. However, server OEMs and customers in the data center sector are now under pressure to reduce their server barebones and have scaled back procurement.”
(Source :TrendForce https://www.trendforce.com/presscenter/news/20200827-10460.html)
New products produced by TSMC’s N5P tech will start sampling in the end of 2021.
“We have multiple 5-nanometer products in development now on TSMC’s N5P process, an enhanced version of TSMC’s 5-nanometer technology, which delivers higher performance and up to approximately 40% lower power compared to the previous 7-nanometer generation. We expect to start sampling these products by the end of ’21, with volume production soon thereafter.”
“5G baseband processor for Nokia is expected to start ramping later this fiscal year.” “We remain on track to start shipping basebands to Nokia and processors customized for massive MIMO applications to Samsung later this year.”
China’s exposure (response to Vivek’s China customer headwind questions):
“But just to be very clear, in terms of our guidance for the third quarter, there are no China headwinds included in that. So, that was not something that we’re saying is a big part of any headwind we’re seeing there. I mean, it could be minor, but it’s not really material”
Networking segment F3Q outlook : F3Q networking segment will increase sequentially mid to high single digit driven by strong growth from the wireless infrastructure market, driven by multiple customers partially offset by enterprise application weakness.
“Let me now discuss the outlook for the third fiscal quarter for our networking business. We expect strong growth from the wireless infrastructure and market, driven by multiple customers. We also project growth in the cloud data center market, and we expect our automotive Ethernet products to start shipping in the model year 2021 vehicles, which are starting production now. However, given the softness in the enterprise market driven by COVID-19 and recently telegraphed by multiple customers and peers, not surprisingly, we project demand for our networking products selling into enterprise applications to be weak. The net result is that we expect our overall networking revenue in the third quarter of fiscal 2021 to increase sequentially in the mid to high-single-digits on a percentage basis”
Storage segment F3Q (Oct 2020) outlook : Mgt expects storage segment will be flat on a sequentially basis due to mgt expects storage controller continue to trend up but Fibre channel will have sequential decline, resulting from COVID-19-related
“we are expecting very different trends between our storage controller and Fibre Channel business. We project our storage controller business, which addresses both, hard disk drives and solid state drive applications to continue to grow sequentially. We expect this growth from the continuation of a ramp of a custom SSD controller partially offset by weaker drive demand from enterprise datacenters and some edge applications such as retail.
Storage controllers, shipping into cloud applications are also expected to continue to trend up in third quarter. Conversely, in our Fibre Channel business, we project a significant sequential decline in revenue, resulting from COVID-19-related weakness in enterprise server and storage system demand. The weakness in Fibre Channel is expected to offset the growth from storage controllers. And as a result, we project third quarter consolidated storage revenue to be approximately flat on a sequential basis.”
Suspend share repurchase program
“During the quarter, we returned $40 million to shareholders through dividend payments. We have temporarily suspended our share repurchase program as we believe it’s prudent to further strengthen our liquidity and increase our cash balance during the uncertain environment. “
Fibre channel business’s SAM is about $500M per year, split by AVGO and MRVL with a similar size. -> (Waldo: Fibre channel is a stable market — ie no growth, no decline, just flat but stable.) ($250M for MRVL per year.)
Hi, guys. This is Michelle on for Quinn. Thanks for taking the question and congrats on the results. So, my question is on the storage business. I know you guys don’t break out the storage controllers from Fibre Channel. But, I was wondering if you can give some color
on how the 2 segments are broken up within that bucket. So, I’m just trying to figure out like the puts and takes for the Fibre Channel decline and trying to determine kind of like the magnitude.
Hi. Michelle, I’ll help you give you some color. We typically don’t give all the details and report all the details. But to help you out, the way to think about it is Fibre Channel business, the overall market opportunity of SAM is about $500 million each year. It’s quite a stable market. Actually, it’s a split between Marvell and Broadcom. So, largely, we are very much similar size. And so, if you think about our Fibre Channel business, it’s all selling into the enterprise data center on-premise. So, current weakness certainly impacts it tremendously. Sequentially, the revenue declined actually to 20% quarter-over-quarter. So, it’s quite significant. Hopefully, that will give you some color. But we don’t break down the details within the storage category generally.”
F3Q guidance :
“We are forecasting revenue to be in the range of $750 million, plus or minus 5%. We anticipate our GAAP gross margin will be approximately 51.4%, and the non-GAAP gross margin will be approximately 63%. We project our GAAP operating expenses to be approximately $368 million. We anticipate our non-GAAP operating expenses to be approximately $280 million. We expect net interest expense to be approximately $15 million and expect non-GAAP tax rate of 5%.
As a result, we anticipate GAAP results in the range of a loss of $0.04 per diluted share on the low end to an income of $0.04 per diluted share on the high end. We expect non-GAAP income per diluted share in the range of $0.22 to $0.28"
“Networking, in our networking business, revenue group during the quarter, was $406 million and grew 3% sequentially and 23% year-over-year. Growth was driven primarily by ongoing 5G deployments in China. In the cloud data center end market, we started ramping a new custom ship at Tier 1 hyperscaler. A LiquidIO programmable SmartNIC and LiquidSecurity HSMs continued to gain traction at cloud customers, and revenue for these two products more than doubled from the same quarter last year.”
“Storage revenue for the second quarter was $290 million, growing 12% sequentially and 6% year-on-year. Strong growth was driven by the start of a ramp of a customized SSD controller for a do-it-yourself or DIY program and easing of COVID-19 production challenges we and our customers experienced in the first quarter.
Supply chain improvements benefited both our storage controller and Fibre Channel products. Controller demand from nearline 16 terabyte HDDs was particularly strong.
Our pipeline of SSD controller engagements continues to grow, driven by our commitment to deliver the most responsive and best user experience at the lowest power using the most advanced process technology. I’m very-pleased that we have won the next generation of SSD controllers for data center applications at one of our key tier 1 NAND OEMs, extending the multiyear relationship we have with them. This controller features our leadership PCIe Gen5 technology, and we expect to continue to drive long-term growth for our storage business.”
“and the change in scope of the ARM server project are collectively driving a significant reduction in our quarterly operating expenses from the current $300 million non-GAAP run rate to the $280 million we are guiding for the third quarter.”
Qualitative statement in every networking’s sectors :
“Cloud has only recently become a larger part of our business, crossing over 10% of our total revenue. In this market with long-term secular growth, we have multiple drivers through our OCTEON processor platform for security products, full custom ASICs, merchant and DIY datacenter SSD controllers, and nearline HCE controllers and prints.
In enterprise, while there are near-term headwinds from COVID-19, it is important to keep a longer term perspective that this is a large and diversified worldwide market, spread across a number of industry verticals. The need for secure and intelligent access to bandwidth is not going away, and the number of end points trying to connect to a network are only expanding. We’ve introduced new solutions, specifically designed to address these challenges, and we believe that we can gain share and drive revenue growth from our own product cycles.
In our edge end market, we have barely scratched the surface of the current Ethernet and future compute opportunity in autos, which we believe will become another key driver for long-term revenue growth. We have assembled under one roof, a critical mass of scarce and unique IP with a very flexible and customized engagement model, which is proving very attractive to our customers. “
Qualitative outlook for borderless enterprise, Ethernet switching and PHY portfolio in CY21
“as we look out to calendar ’21. And I referenced in my remarks as well as you probably saw some of the announcements we made around our borderless enterprise. I mean, that whole thing is really code for Marvell just refreshed its entire Ethernet switching and PHY portfolio. And the last time we did that, which was a few years ago, we jumped a process node or 2 at that time. We added a whole bunch of features. We optimized the products. And we had great success. It was part of the kind of the initial Marvell turnaround story was that networking growth. And so, we see the same type of opportunity starting really next year with some of our new products, which are, again, in the latest process nodes that are relevant for those markets, the latest sets of features. And then, even beyond that, as we look out, I’d say, beyond next year and you start looking at our 5-nanometer portfolio, which we’re sampling our first products next year on, but all the design wins that we’re in the hunt on right now are really in that node for the large sockets. We’re extremely well positioned. And I would say that even goes beyond Ethernet, and also looking out to our next-generation OCTEON products, which have gotten a lot of press because of their success in base stations recently.”
“But don’t forget about the wired market. And the wired market, I think, if you look at all the networking OEMs and communication OEMs and what they’re going to need in the future and you look at us with a best-in-class infrastructure processor in 5-nanometer, which would be the 10th generation Cavium processor, we’re very excited about that business between — on a number of fronts.”