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MRVL - Marvell Technology


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Thanks for posting. It was a nice Christmas present for MRVL !!

 

Initial adjudications are generally on the higher side. Though not impossible, I would be very surprised if this amount holds up in a higher court and/or upon appeal.

 

The tripling of award amount looks like a bummer. Does that mean the actual award would have been for ~$400M?

 

I think MRVL has the ability to pay off the award if it gets reduced to $400M but if the higher amount holds, I do see MRVL raising capital in the future diluting existing shareholders.

 

 

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Thanks for posting. It was a nice Christmas present for MRVL !!

 

Initial adjudications are generally on the higher side. Though not impossible, I would be very surprised if this amount holds up in a higher court and/or upon appeal.

 

The tripling of award amount looks like a bummer. Does that mean the actual award would have been for ~$400M?

 

I think MRVL has the ability to pay off the award if it gets reduced to $400M but if the higher amount holds, I do see MRVL raising capital in the future diluting existing shareholders.

 

Just starting to follow this company after today's news. But the way I read it, it sound like it could triple the 1.1B number. Surprised at how high this # is. Considering jumping in, but trying to read up as much as I can on the situation first.

 

In these patent cases does the amount have to be paid in a lump sum or can they negotiate to pay our over the course of a few years?

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Just starting to follow this company after today's news. But the way I read it, it sound like it could triple the 1.1B number.

 

You are right. I seem to have misread the report. The award was much more than the claims so I misconstrued it. A 3.3B ( if 3x the original award) ruling seems far fetched given that the award for the Samsung/Apple case was ~$1B. But judges have been known to award inane and ridiculous judgements before, so I wouldn't be surprised.

 

I don't know when the judge's ruling will be posted. I would like to read it in order to understand the basis for the award.

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Up until there is a judgement they usually don't take any accounting reserves. That's like admitting you are guilty. They did not make any accounting reserves but they did hoard a lot of cash, which you could consider the real reserve.

 

I would expect a 500M accounting reserve to appear in the next quarter.

 

BeerBaron

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  • 4 weeks later...

http://www.marketfolly.com/2013/01/david-einhorns-q4-letter-greenlight.html After reading this I am interested in digging through Marvell.

 

MRVL has been on my list to look into. With Einhorn's comments I am moving it to the top of my list. With an EV of $2.96B and TTM FCF of $0.5B it would only take a slight catalyst for Einhorn to be right when he said, "We expect the shares to sprint higher in 2013."

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I don't follow Einhorn's thinking here. MRVL is essentially a bet on WDC, it's largest customer, which again is a bet on HDD. He is already taking on that exposure with STX. So with MRVL he is doubling up on HDD risk, but at twice the price or even more based on PE mutliples?

 

So by implicitly backing WDC he is betting against his existing holding in STX?

 

MRVL is reliant on one significant customer WDC and that industry just went through a significant consolidation, which should result in a significant increase in pricing power for WDC. Bad news for MRVL?

 

If it comes down to STX and MRVL, why not back STX which has superior capital allocation.

 

What am I missing?

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MrB, are you comparing their cash hoards at all and management holdings at all?

 

mrvl has very little debt and ton of a cash. stx has a good amount of cash and debt.  also, from what i see, mrvl insiders hold about 9% of shares vs less than 1% for stx.

 

cash/debt -- Correct, but on an EV/EBIT, EV/EBITDA basis etc MRVL is still trading at double that of STX for the same risk. STX has proven that it will allocate capital very prudently and it has a tonne of it coming in on an annual basis. MRVL is still sitting on the cash, so you run the risk of them doing something silly. Even if you are comfortable with taking on that risk, why take on the HDD risk at twice the price via MRVL?

 

Insider holdings--Good comment and I remember when comparing WDC and STX that both these companies' managements are note squeamish when it comes to issuing options and selling into their buybacks. From memory it is 10% of shares outstanding every 8 years or so. So 2%-3% per annum. I don't know how MRVL compares on that score. I take your point, but you can also argue that WDC and STX managements take the majority of their value out of the company via shares so they have an incentive to look after shareholders. Not my preference, but I think the argument has merit.

 

Still I come back to why Einhorne would introduce MRVL into the mix when he knows and owns STX. I'm probably missing something, but it just seems of more of the same at twice the price.

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Still I come back to why Einhorne would introduce MRVL into the mix when he knows and owns STX. I'm probably missing something, but it just seems of more of the same at twice the price.

 

Didn't he mention an upcoming revenue stream that isn't accounted for?  Perhaps including that normalizes it to STX, then you get the no debt, insider ownership, cash, etc.?

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Still I come back to why Einhorne would introduce MRVL into the mix when he knows and owns STX. I'm probably missing something, but it just seems of more of the same at twice the price.

 

Didn't he mention an upcoming revenue stream that isn't accounted for?  Perhaps including that normalizes it to STX, then you get the no debt, insider ownership, cash, etc.?

 

Good point, but it has to be massive if you consider that for STX and MRVL

a)EV/EBIT is about 3 and 6 respectively and

b) when I do a rough eyeball of his original cost basis he paid half as much and twice as much respectively to where they are today.

 

So roughly speaking the upcoming "large product transition" must make up for the difference between a EV/EBIT of 1.5 v 12?

 

At the end of the day it was probably just a diversification decision.

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  • 3 weeks later...

I don't follow Einhorn's thinking here. MRVL is essentially a bet on WDC, it's largest customer, which again is a bet on HDD. He is already taking on that exposure with STX. So with MRVL he is doubling up on HDD risk, but at twice the price or even more based on PE mutliples?

 

So by implicitly backing WDC he is betting against his existing holding in STX?

 

MRVL is reliant on one significant customer WDC and that industry just went through a significant consolidation, which should result in a significant increase in pricing power for WDC. Bad news for MRVL?

 

If it comes down to STX and MRVL, why not back STX which has superior capital allocation.

 

What am I missing?

 

http://www.bloomberg.com/news/2013-02-14/einhorn-s-greenlight-buys-google-aetna-sells-wellpoint.html

 

Even more confused now. I think he has been lightening up on STX too.

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  • 1 month later...

ross, thanks for the update. He has like 50 million or so, right?

 

Yes, it looks like he reduced his shares by ~2%. Not a big deal, I saw it when I was looking through some insider buys/sells this morning. Something to keep an eye on though. 

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Are you guys worried about Intel?  (I am long Intel.)  Intel has a moat in the semiconductor business because its scale allows it to build cutting-edge fabs.  Its chips will have lower power consumption and/or better performance than everybody else.  If you look at Intel versus AMD... it's not a fair fight.  So Intel taking on all the smartphone SoC manufacturers is going to be scary.  If you look at reviews of Intel's smartphone chip in the Xolo (and there's another phone), performance and power consumption are middle of the pack right now. 

 

http://semiaccurate.com/2012/04/26/how-well-does-intels-new-phone-work-as-a-phone/

 

Eventually the software ecosystem will move away from having to do ARM emulation (emulation is slow)... this will increase the performance of Intel chips on Android phones.  And Intel will start moving its smartphone chips onto fabs that are a step ahead of the competition.  This will not be a fair fight.

 

*Historically...

Intel took huge market share away from the RISC instruction set chip manufacturers.  PowerPC, Cray, SGI, etc.

Intel didn't kill off Xilinx and Altera.  Their software design tools are critical and difficult to build.

Intel didn't kill Nvidia and ATI.  Graphics chips are hard to do.  Intel is doing ok with its integrated graphics on lower-end processors.

Intel has always enjoyed a huge advantage over AMD.

 

What is the upside for INTC?

I see that ARM is a hot stock and it is making the chips for the smartphones. But for 2012 its net income is only $165M. If that is all the profits from the smartphone market, then it doesn't seem to be very attractive, even if INTC can take over that entire market. Do I misunderstand anything here? ::)

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Guest wellmont

 

What is the upside for INTC?

I see that ARM is a hot stock and it is making the chips for the smartphones. But for 2012 its net income is only $165M. If that is all the profits from the smartphone market, then it doesn't seem to be very attractive, even if INTC can take over that entire market. Do I misunderstand anything here? ::)

 

no it's not all the profits in smartphones. it's a tiny part of it. it's a IP royalty on a series of chips it sells to others. Samsung makes billions selling devices that contain ARM chips. Intel would be selling the actual chips, which have more profit potential than simply selling IP for a royalty.

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