Marvell Plays Catchup in GigE
As 2003 winds down, Marvell Technology Group Ltd. (Nasdaq: MRVL) looks to have significant challenges coming in 2004.
Marvell's issues on the Gigabit Ethernet side include the probable loss of major Intel Corp. (Nasdaq: INTC) business in 2004. But a more pressing matter could be the slow start for Prestera, a family of Gigabit Ethernet switch chips, one of which was announced today (see Marvel Intros 10-GigE Switch).
Marvell officials have acknowledged that its new Gigabit Ethernet products suffered delays, as was pointed out last week by a prominent Wall Street analyst. But officials at the chipmaker contend they're poised to beat out Broadcom Corp. (Nasdaq: BRCM) in the long run.
Gigabit Ethernet switch chips sit inside equipment ranging from small gateways to chassis-based switches. They switch and aggregate traffic, and they can perform QOS (quality of service) functions that can be the basis for features such as security.
The market for Gigabit Ethernet switches began to blossom this year, with Broadcom and Marvell expected to be the main chip contenders. But Marvell was late in producing its Prestera chips, which the company had been discussing since late 2001 (see Marvell Readies GigE Attack).
All this has led Ashok Kumar, analyst with U.S. Bancorp Piper Jaffray, to fret that there's trouble ahead for Marvell.
"In [Gigabit Ethernet] switch chips, Marvell is its own worst enemy," wrote Kumar in a note issued last week.
Here's Kumar's explanation: The product looked great on paper, with advanced features and scaleable performance suitable for a variety of end products. But Kumar believes that Marvell encountered major architectural problems, requiring costly silicon revisions in progress toward sampling.
"These design problems have caused about a one-year slip, costing [Marvell] millions of dollars in engineering costs and lost revenue," wrote Kumar.
The delays gave a headstart to Broadcom's StrataXGS chip. According to Kumar, Broadcom officials are claiming 100 customers for StrataXGS, 16 of which have begun shipping products. "In terms of volumes, Marvell is still behind Broadcom," says Sean Lavey, analyst with IDC.
Marvell officials concede they had delays. "It's the complexity. We started by launching the highest-end chip," says Weili Dai, Marvell executive vice president. "It did take some time, but now we're extremely pleased with the results."
The big question now is: With the product back on track, can Marvell make up lost time?
Prestera has racked up three customers: Enterasys Networks Inc. (NYSE: ETS), Huawei Technologies Co. Ltd., and Nortel Networks Corp. (NYSE/Toronto: NT), Dai says. The three have shipped nine Prestera-packed products among them, and more wins are en route. "Next quarter you'll see about a dozen different customers," Dai says.
Separately, Marvell is contending with another issue -- the erosion of its Intel business. Intel so far has based its Ethernet controllers -- a product category different from switch chips -- on a Marvell physical-layer (PHY) part. Intel has already developed a replacement for the Marvell part, and an all-Intel version of the controller has been demonstrated (see Intel's Ga-Ga for GigE).
Intel accounted for more than 10 percent of Marvell's $215 million revenues last quarter, so the money hasn't dried up yet (see Marvell Reports Q3). It's possible Intel won't pull its business entirely until it perfects a newer version of the controller, one that doesn't rely on an Intel-proprietary bus.
Kumar thinks that will happen next year, with Intel halting nearly all its PHY-chip purchases with Marvell. To compensate for the lost money, Marvell has started shipping its own controller, called Yukon (see Marvell Announces Controller and Intel/Marvell: Who Was Stood Up?).
— Craig Matsumoto, Senior Editor, Light Reading