Marvell(R) Technology Group Ltd. Reports Record Third Quarter Fiscal 2006 Results

18 November 2005

Marvell(R) Technology Group Ltd. (Nasdaq: MRVL), the leader in development of storage, communications, and consumer silicon solutions, today reported financial results for its third fiscal quarter ended October 29, 2005. Net revenue for the third quarter of fiscal 2006 was a record $426.0 million, an increase of 34.1% over net revenue of $317.6 million for the third quarter of fiscal 2005 and a 9.1% sequential increase from net revenue of $390.5 million for the second quarter of fiscal 2006. Net income under generally accepted accounting principles (GAAP) was $93.0 million, or $0.29 per share (diluted), for the third quarter of fiscal 2006, compared with a net income under GAAP of $43.6 million, or $0.15 per share (diluted), for the third quarter of fiscal 2005. Net revenue for the nine months ended October 29, 2005 was $1,181.3 million, an increase of 33.6% over net revenue of $884.3 million for the nine months ended October 30, 2004. Net income under GAAP was $233.9 million, or $0.75 per share (diluted), for the nine months ended October 29, 2005, compared with a net income under GAAP of $86.7 million, or $0.29 per share (diluted), for the nine months ended October 30, 2004. Marvell reports net income and basic and diluted net income per share in accordance with GAAP and additionally on a non-GAAP basis, referred to as pro forma. Pro forma net income, where applicable, excludes the effect of amortization and write-off of acquired intangible assets and other and amortization of stock-based compensation. Pro forma net income was $113.3 million, or $0.36 per share (diluted), for the third quarter of fiscal 2006, compared with pro forma net income of $66.6 million, or $0.22 per share (diluted), for the third quarter of fiscal 2005. Shares used in computing net income per share for the third quarter of fiscal 2006 increased to 316.2 million, compared with 300.6 million for the third quarter of fiscal 2005. Pro forma net income was $295.0 million, or $0.94 per share (diluted), for the nine months ended October 29, 2005, compared with pro forma net income of $175.4 million, or $0.59 per share (diluted), for the nine months ended October 30, 2004. Shares used in computing pro forma net income per share for the nine months ended October 29, 2005 increased to 313.4 million, compared with 296.6 million for the nine months ended October 30, 2004. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. A reconciliation of GAAP net income to pro forma net income is included in the financial statements portion of this release as well as on our website in the Investors section at http://www.marvell.com. Marvell's management believes the non-GAAP information is useful because it can enhance the understanding of the Company's ongoing economic performance and Marvell therefore uses pro forma reporting internally to evaluate and manage the Company's operations. Marvell has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results. "Q3 was another excellent quarter for Marvell," stated Dr. Sehat Sutardja, Marvell's President and CEO. "We continue to experience strong growth and design activity for an increasing number of different consumer and enterprise applications. The expanding breadth of our product portfolio as well as the growing diversity of our revenue streams allows us to build upon our consistently strong financial results." Revenue for the third quarter was a record for Marvell and represented the 32nd consecutive quarter for sequential revenue growth. During the quarter Marvell continued to generate strong positive cash flows and reported its highest level of cash, cash equivalents and short-term investments with a balance of $914.9 million. The following is a review of some of the recent highlights that occurred since last quarter's earnings release: -- In October, Marvell further extended its consumer wireless local are etworking (WLAN) technology leadership with the introduction of th orld's first WLAN chipset based on the new Enhanced Wireles onsortium's (EWC) technology to accelerate the adoption of 802.11n.As the first company with solutions supporting the EWC standard,Marvell is closely working with key customers to deliver consume roducts based on this new high performance standard. Building upo arvell's strong success in driving the adoption of its embedde onsumer WLAN solutions into applications such as cell phones, gam onsoles, digital cameras, printers and PDAs, Marvell's new 88W8360802.11n family ties together all digital, consumer components b nabling consumers to enjoy new levels of wireless performance an overage demanded by the next generation of integrated audio/video/dat onsumer appliances. -- Marvell announced the initial launch of the Discovery V, the industry' ost powerful system controller for Power Architecture(TM) technology-based microprocessors. Discovery V sets new benchmarks for performanc nd integration by incorporating an innovative cross-bar architecture,support for advanced communications peripherals, and performance-tune nterfaces. The newest member of Marvell's widely adopted Discover amily is optimized for a broad range of applications fro ophisticated routers, switches and wireless base stations to high-volume storage and laser printer applications. -- The industry's ongoing adoption of Gigabit technology continues t rive revenue growth for Marvell's client and infrastructure Gigabi olutions. During the quarter, Marvell experienced strong revenu rowth from its Gigabit controllers for client applications as well a idespread adoption of the Marvell Total Solution(TM) which combine oth production ready software and silicon across all segments of th nfrastructure switching market ranging from highly sophisticated metr ore systems to high volume small and medium business (SMB) equipment. Marvell will be conducting a conference call today at 1:45 p.m. PST to discuss its third quarter financial results. To listen to the conference call, investors can dial (706) 679-0800 approximately ten minutes prior to the initiation of the teleconference and refer to conference code 1861100. Replay of the conference call will be available until November 24, 2005 at midnight PST by dialing (706) 645-9291. The conference call will also be available via the web at http://www.marvell.com. Please visit the Investor Events section. Replay on the Internet will be available until November 17, 2006. The financial results included in this release are unaudited. About Marvell Marvell is the leader in development of storage, communications and consumer silicon solutions. The Company's diverse product portfolio includes switching, transceiver, communications controller, wireless, and storage solutions that power the entire communications infrastructure, including enterprise, metro, home, and storage networking. As used in this release, the terms "Company" and "Marvell" refer to Marvell Technology Group Ltd. and its subsidiaries, including Marvell Semiconductor, Inc. (MSI), Marvell Asia Pte Ltd (MAPL), Marvell Japan K.K., Marvell Taiwan Ltd., Marvell International Ltd. (MIL), Marvell U.K. Limited, Marvell Semiconductor Israel Ltd. (MSIL), RADLAN Computer Communications Ltd., and SysKonnect GmbH. MSI is headquartered in Sunnyvale, Calif., and designs, develops and markets products on behalf of MIL and MAPL. MSI may be contacted at (408) 222-2500 or at http://www.marvell.com. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements based on projections and assumptions about our products and our markets. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "should," and their variations identify forward-looking statements. These statements include those relating to continued growth and diversity of our revenue stream, continued growth and design activity for the enterprise and consumer applications, ongoing adoption of Gigabit technology and the anticipated features and benefits of our WLAN solutions. Statements that refer to, or are based on projections, uncertain events or assumptions also identify forward-looking statements. These statements are not guarantees of results and are subject to risks and uncertainties. Some risks and uncertainties that may adversely impact the statements in this release include, but are not limited to, the timing, cost and successful completion of development and volume production, end-customer qualification and adoption, and the timing, pricing, rescheduling, or cancellation of orders. For other factors that could cause Marvell's results to vary from expectations, please see the sections titled "Additional Factors That May Affect Future Results" in Marvell's annual report on Form 10-K for the fiscal year ended January 29, 2005. We undertake no obligation to revise or update publicly any forward- looking statements. Marvell(R), Marvell Total Solution and the Marvell logo are trademarks of Marvell. All other trademarks are the property of their respective owners. CONTACT: Mike Tate of Marvell Technology Group Ltd., +1-408-222-2500 Marvell Technology Group Ltd. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) Three Months Ended Nine Months Ended October 29, October 30, October 29, October 30, 2005 2004 2005 2004 Net revenue $426,026 $317,583 $1,181,250 $884,314 Cost of goods sold 197,077150,260 555,967 419,001 Gross profit 228,949167,323 625,283 465,313 Operating expenses: Research and development77,689 66,378 222,751 193,686 Selling and marketing 21,634 19,381 63,89857,966 General and administrative 9,029 9,330 24,10723,829 Amortization of stock-base ompensation 465 837 1,853 3,497 Amortization/write-off o cquired intangible asset nd other 19,746 19,758 59,25882,775 Facilities consolidatio harge -- 2,414 -- 2,414 Total operating expenses 128,563118,098 371,867 364,167 Operating income 100,386 49,225 253,416 101,146 Interest and other income, net 5,244 1,770 13,240 5,058 Income before income taxes 105,630 50,995 266,656 106,204 Provision for income taxes12,584 7,400 32,77619,488 Net income$93,046$43,595$233,880 $86,716 Basic net income per share $0.33 $0.16 $0.83 $0.32 Diluted net income per share $0.29 $0.15 $0.75 $0.29 Weighted average shares - basic 283,655271,069 281,121 267,731 Weighted average shares - diluted316,215300,649 313,352 296,616 Marvell Technology Group Ltd. Pro Forma Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) Three Months Ended Nine Months Ended October 29, October 30, October 29, October 30, 2005 2004 2005 2004 Net revenue $426,026 $317,583 $1,181,250 $884,314 Cost of goods sold 197,077150,260 555,967 419,001 Gross profit 228,949167,323 625,283 465,313 Operating expenses: Research and development77,689 66,378 222,751 193,686 Selling and marketing 21,634 19,381 63,89857,966 General and administrative 9,029 9,330 24,10723,829 Total operating expenses 108,352 95,089 310,756 275,481 Operating income 120,597 72,234 314,527 189,832 Interest and other income, net 5,244 1,770 13,240 5,058 Income before income taxes 125,841 74,004 327,767 194,890 Provision for income taxes12,584 7,400 32,77619,488 Pro forma net income $113,257$66,604$294,991 $175,402 Basic pro forma net income per share $0.40 $0.25 $1.05 $0.66 Diluted pro forma net income per share $0.36 $0.22 $0.94 $0.59 Weighted average shares - basic 283,655271,069 281,121 267,731 Weighted average shares - diluted316,215300,649 313,352 296,616 Reconciliation of GAAP net income to pro forma net income: GAAP net income$93,046$43,595$233,880 $86,716 Amortization of stock-based compensation 465 837 1,853 3,497 Amortization/write-off of acquired intangible assets and other 19,746 19,758 59,25882,775 Facilities consolidation charge -- 2,414 -- 2,414 Pro forma net income $113,257$66,604$294,991 $175,402 The above pro forma statements of operations are for informational purposes only and are provided for understanding our operating results. The pro forma statements of operations have not been prepared in accordance with GAAP, should not be considered a substitute for our historical financial information prepared in accordance with GAAP and may be different from pro forma measures used by other companies. The pro forma income has been derived by adjusting the net income under generally accepted accounting principles for the impact of non cash stock-based compensation charges, non-cash charges associated with purchase accounting and other write-off related expenses. Marvell Technology Group Ltd. Condensed Consolidated Balance Sheets (Unaudited)(In thousands) October 29, January 29, Assets 2005 2005 Current assets: Cash, cash equivalents and short-term investments $914,866 $660,014 Accounts receivable, net 253,337 200,954 Inventory, net 149,929 128,889 Prepaid expenses and other current assets 104,24327,937 Total current assets 1,422,375 1,017,794 Property and equipment, net 222,315 161,770 Goodwill and acquired intangible assets 1,501,378 1,560,636 Other noncurrent assets 71,75348,762 Total assets$3,217,821 $2,788,962 Liabilities and Shareholders' Equity Current liabilities: Accounts payable$190,169 $129,728 Accrued liabilities 58,32152,740 Income taxes payable 3,198 3,195 Deferred income 25,79215,938 Current portion of capital lease obligations 13,94613,204 Total current liabilities291,426 214,805 Capital lease obligations18,31411,590 Other long-term liabilities 109,58665,137 Total liabilities 419,326 291,532 Shareholders' equity: Common stock 567 555 Additional paid-in capital 3,100,862 3,035,200 Deferred stock-based compensation(1,489) (3,400) Accumulated other comprehensive loss (2,207) (1,807) Accumulated deficit (299,238) (533,118) Total shareholders' equity 2,798,495 2,497,430 Total liabilities and shareholders' equity$3,217,821 $2,788,962

Source: PR Newswire