Marvell Technology Reports Fiscal Fourth Quarter and Fiscal 2009 Results
Revenue: $513 Million, FQ409; $2.95 Billion, FY2009
Free Cash Flow: $95 Million, FQ409; $607 Million, FY2009
Announces Significant Operating Expense Reduction Actions
Santa Clara, California
(March 5, 2009) –
arvell Technology Group Ltd. (NASDAQ: MRVL), a world leader in storage, communications and consumer silicon solutions, today reported financial results for the fourth quarter and fiscal year 2009, ended January 31, 2009.
Net revenue for the fourth quarter of fiscal 2009 was $513 million, a 39 percent decrease from $845 million in the fourth quarter of fiscal 2008, ended February 2, 2008, and a 35 percent sequential decrease from $791 million in the third quarter of fiscal 2009, ended November 1, 2008.
Net revenue for the fiscal year ended January 31, 2009 was $2.95 billion, an increase of approximately 2 percent over net revenue of $2.89 billion for the fiscal year ended February 2, 2008.
GAAP net loss was $65 million, or $0.11 per share (diluted), for the fourth quarter of fiscal 2009, compared with GAAP net income of $1 million, or essentially break-even per share, for the fourth quarter of fiscal 2008. GAAP net income was $71 million, or $0.11 per share (diluted) in the third quarter of fiscal 2009.
GAAP net income was $147 million, or $0.23 per share (diluted), for the year ended January 31, 2009, compared with a GAAP net loss of $114 million, or $0.19 per share (diluted), for the year ended February 2, 2008.
Non-GAAP net income declined to $32 million, or $0.05 per share (diluted), for the fourth quarter of fiscal 2009, a 74 percent decrease compared with non-GAAP net income of $123 million, or $0.20 per share (diluted), for the fourth quarter of fiscal 2008 and a decrease of 78 percent from non-GAAP net income of $145 million, or $0.23 per share (diluted), for the third quarter of fiscal 2009.
Non-GAAP net income was $482 million, or $0.76 per share (diluted), for the fiscal year ended January 31, 2009, compared with non-GAAP net income of $280 million, or $0.44 per share (diluted), for the fiscal year ended February 2, 2008.
“The results for our fourth quarter reflect the challenging business environment our company, and the world, currently faces,” said Dr. Sehat Sutardja, Marvell Chairman and Chief Executive Officer. “Notwithstanding the challenges we encountered during our fourth quarter, we were able to sustain gross margins, act quickly to lower our operating expenses and generate a healthy free cash flow. However, we believe the current economic climate will not substantially improve over the short term. Consequently, we are taking actions to re-align our business to reflect the realities of the current economic environment. We are focused on improving the operating efficiency of our business and lowering the expenses under our control, while reinforcing the long-term financial strength of Marvell. Our results in our fourth quarter demonstrate initial progress toward these goals.”
Marvell is implementing plans to lower the overall costs and expenses of the company in response to the deteriorating economic environment. As a result of this plan and combined with certain cost reduction measures taken in the fourth quarter of fiscal 2009, Marvell plans to reduce its global workforce by approximately 15 percent, or approximately 850 employees. Marvell estimates that the restructuring charges associated with the reduction in force and consolidation of facilities taken to date will be approximately $20 million, including approximately $14 million related to severance and other employee benefit payments and approximately $6 million related to facility consolidation. Marvell expects the expense reduction actions in the plan to be implemented through calendar year 2009. This estimate includes restructuring charges recorded in the fiscal fourth quarter of 2009 of approximately $9.7 million, comprised of $6.7 million of severance and other employee benefit costs and $3.0 million of facilities consolidation. Marvell estimates that the restructuring measures taken to date will result in approximately $15 million in cash payments in calendar year 2009 and the remainder will be a non-cash accounting-related charge associated with facilities consolidation. As Marvell implements the remaining portions of this plan, additional charges will be incurred, the amount of which Marvell cannot reasonably estimate at this time, but which will likely include additional severance and other employee benefit related costs, lease termination costs, facility site consolidations or closures, and impaired asset charges.
Marvell reports net income (loss), basic and diluted net income (loss) per share in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income (loss) to non-GAAP net income for the three months ended January 31, 2009, November 1, 2008 and February 2, 2008 and fiscal years ended January 31, 2009 and February 2, 2008, respectively, appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization and write-offs of acquired intangible assets, restructuring costs, and certain one-time expenses or benefits.
GAAP gross margin for the fourth quarter of fiscal 2009 was 50.7 percent, compared to 48.1 percent for the fourth quarter of fiscal 2008, and 52.1 percent for the third quarter of fiscal 2009. GAAP gross margin for fiscal 2009 was 51.6% compared to 48.3% for fiscal 2008.
Non-GAAP gross margin for the fourth quarter of fiscal 2009 was 51.3 percent, compared to 48.7 percent for the fourth quarter of fiscal 2008 and 52.3 percent for the third quarter of fiscal 2009. Non-GAAP gross margin for fiscal 2009 was 52 percent compared to 48.8 percent for fiscal 2008.
Shares used to compute GAAP net loss per diluted share, for the fourth quarter of fiscal 2009 were 615 million shares, compared with 627 million shares in the fourth quarter of fiscal 2008 and 631 million shares in the third quarter of fiscal 2009. Shares used to compute non-GAAP net income per diluted share for the fourth quarter of fiscal 2009 were 629 million shares compared with 627 million shares for the fourth quarter of fiscal 2008 and 633 million shares for the third quarter of fiscal 2009.
Shares used to compute GAAP net income per diluted share, for the fiscal year ended January 31, 2009 were 630 million shares, compared with shares used to compute GAAP net loss per diluted share of 590 million shares for the fiscal year ended February 2, 2008. Shares used to compute non-GAAP net income per diluted share for the fiscal year ended January 31, 2009 were 630 million shares compared with 630 million shares for the fiscal year ended February 2, 2008.
Cash flow from operations for the fourth quarter of fiscal 2009 was $109 million, down 33 percent from the $163 million in the fourth quarter of fiscal 2008 and down 58 percent sequentially from the $258 million reported in the third quarter of fiscal 2009. Cash flow from operations for fiscal 2009 was $681 million, as compared to $177 million for fiscal 2008. Free cash flow, defined as cash flow from operations, less capital expenditures, was $95 million, down 27 percent from the $131 million in the fourth quarter of fiscal 2008 and down 61 percent sequentially from the $246 million reported in the third quarter of fiscal 2009. Free cash flow for the year was $607 million in fiscal 2009 as compared to $64 million in fiscal 2008.
Marvell will be conducting a conference call on March 5, 2009 at 2:00 p.m. PST to discuss results for the fourth quarter and fiscal year ended January 31, 2009. Interested parties may dial-in to the conference call at 1-800-299-9630, pass-code 70089700. The call is being webcast by ThomsonReuters and can be accessed at Marvell’s website under the Investor Events section of the Investor Relations page at http://www.marvell.com/investors/events.jsp. Replay on the internet will be available following the call until April 4, 2009.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discrete events that management does not consider to be directly related to Marvell’s core operating performance. Non-GAAP earnings per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP earnings per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of compensation costs expected to be incurred in future periods, but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also include the dilutive/antidilutive effects of common stock options and restricted stock.
Marvell believes that the presentation of non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to Marvell’s financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell’s Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC’s website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.
Marvell Technology (NASDAQ: MRVL) is a global leader in the development of storage, communications and consumer silicon solutions. Marvell’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. For more information visit www.marvell.com
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our expectations about when the current economic climate may change; our ability to re-align our business to the current economic environment; the magnitude and financial impact of the reduction in force; and statements concerning the Company’s use of non-GAAP net income and net income per share as important supplemental information. These statements are not guarantees of results and should not be considered as an indication of future performance. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties, including, among others, the Company’s reliance on major customers and suppliers; market acceptance of new products; uncertainty in the worldwide economic environment; successful execution of the Company’s restructuring plan and other risks detailed in Marvell’s SEC filings. When Marvell files its Form 10-K for fiscal year 2009, the financial statements may differ from the results disclosed in this press release because judgments and estimates that management used in preparing the financial results reported in this press release may need to be updated to the date of the filing. The Company's results also remain subject to review by the Company's independent registered public accounting firm. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in the Marvell’s latest Quarterly Report on Form 10-Q for the quarter ended November 1, 2008 and Current Reports on Form 8-K, as filed with the SEC and other factors detailed from time to time in Marvell’s filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.