Marvell Technology's Sales Get Networking Business Boost While Fourth Quarter Revenue Guided In Line With Street

7:48AM ET 12/04/2020 MT Newswires
Marvell Technology (MRVL) reported fiscal third-quarter sales growth amid a surge in the semiconductor company's networking business, while it offered guidance for the final three months of the year about in line with the consensus on views for sequential gains in the storage segment.

Net revenue rose to $750.1 million during the three months that ended Oct. 31 from $727.3 million a year ago, according to a statement late Thursday. The average analyst sales forecast compiled by Capital IQ was $751 million. Adjusted earnings of $0.25 per share rose from $0.17 per share a year ago and were in line with market expectations.

Chief Executive Matt Murphy said revenue growth was "driven by the networking business," which reported a 35% surge in year-over-year sales. He added "strong 5G and cloud product ramps" were fueling growth in these strategic markets.

The networking business is facing supply constraints on some products, Murphy said during a call with analysts. "As a result, after a very strong third quarter, we expect networking revenue in the fourth quarter to be approximately flat on a sequential basis," he said. Year-on-year, the segment is expected to see revenue rise about 25%, he said.

Marvell's storage revenue fell 5% sequentially, in the third quarter, below expectations of flat, Murphy said. In the current three months, the company sees that segment rebounding with "sequential revenue growth in the low teens on a percentage basis," he said.

In fiscal fourth quarter, total sales are pegged in a range 5% above or below $785 million, compared with estimates of $785.4 million, according to data compiled by Capital IQ. Adjusted diluted earnings per share are seen between $0.25 and $0.33 in the final three months of the financial year, versus Street estimates of $0.29.

Marvell said its acquisition of Inphi (IPHI) is likely to close by the second half of next calendar year. In a note on Friday, Morgan Stanley raised its price target on Marvell by $2 to $42, with an equal-weight rating.

"We continue to hear enthusiasm from investors for the themes that Marvell participates in, principally in 5G infrastructure and cloud -- and the cloud exposure should be much more compelling post Inphi, so despite the high valuation and lack of upside, we do expect the narrative to keep a bid to the stock," analysts Joseph Moore and Craig Hettenbach said.

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