Feeling Less Marvell-ous
Marvell stock was down $3.27 (17.1%) to $19.09 after the company warned of a third-quarter shortfall and likely restatements tied to stock options discrepancies. (See Marvell Revises, Restates.)
So goes the latest installment of the stock options scandal, in which companies are accused of changing the dates on options to create better payoffs for executives. Marvell is far from alone in having to restate earnings. Rival Broadcom Corp. (Nasdaq: BRCM) announced in July that options-related restatements would be coming. September saw Broadcom expand the estimated size of those restatements, with the company's chief financial officer retiring (coincidentally?) shortly afterwards. (See Broadcom to Restate Earnings, Broadcom to Restate More, and Broadcom CFO Retires.)
Marvell gave the usual options spiel yesterday, saying an internal review, not yet completed, "has concluded that the Company will need to restate historical financial statements to record additional non-cash charges for stock-based compensation expense related to certain past option grants."
This goes back, way back. Marvell says its earnings reports "relating to periods beginning on or after its initial public offering in June 2000 should no longer be relied upon."
Marvell didn't hint at the size of the upcoming restatements.
Possibly more damaging to the stock price is the earnings miss. For its third quarter, which ends this month, Marvell expects to report revenues of around $516.6 million, 10 percent lower than in the second quarter.
Marvell's second-quarter revenues of $574 million, reported in August, were a disappointment in themselves. At the time, Marvell further doused analyst expectations by saying the third quarter would see just a 1 percent revenue increase. (See Oracle GAs Identity Mgt.) Analysts padded that a bit to come up with a consensus forecast of $582.4 million, as tallied by Thomson First Call .
In other words, Marvell has now disappointed analysts twice with its third-quarter forecasts -- hence the beating the stock took after hours.
Marvell's second-quarter blues included an oversupply of pre-standard 802.11n chips for wireless LANs. This time, the hard disk drive sector was at fault, possibly due to weak PC demand and an inventory glut, Marvell said in yesterday's release.
Deutsche Bank AG analyst Ross Seymore believes Marvell's long-term outlook is still good.
"While Marvell's exposure to the HDD segment does present rev growth challenges in the near and LT [long term], we continue to expect a reacceleration in growth in F4Q [Marvell's fiscal fourth quarter, which ends in January] and beyond as it continues to be a broad-based market share gainer" in markets such as cell phones, printers, and the Sony Corp. (NYSE: SNE) PlayStation 3," Seymore wrote in a report issued late yesterday.
— Craig Matsumoto, Senior Editor, Light Reading