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Reportedly, semiconductor chip maker Marvell Technology (MRVL - Snapshot Report) was ordered by U.S. District Judge Nora Barry Fischer to pay around $1.54 billion in damages to Carnegie Mellon University (CMU) for the infringement of two patented technologies. Moreover, an additional $79.6 million charge was levied on the company pertaining to the same lawsuit.

Notably, the amount of the damage was higher than the original $1.17 billion that Marvell was asked to pay CMU in 2012. The lawsuit dates back to 2009, when the semiconductor chipmaker was sued by CMU for infringing two patented technologies for delivering high performing chips. These chips correspondingly help hard disk drives to accurately read data from high speed magnetic disks.

Judge Fisher observed that Marvell had ‘willfully’ copied patents and thus the enhanced damages to CMU were justified. The company proposed a one-time royalty payment of $250k to CMU, which was rejected by the court. Reportedly, Marvell earned a hefty $10.34 billion as revenues and $5.05 billion as operating profit leveraging the technology.

In the current scenario, Marvell is reportedly reviewing the verdict and will respond soon. However, if the company is asked to pay the entire amount in a single transaction, it will have a significant impact on its balance sheet (it currently has $1.97 billion in cash, cash equivalents and short-term investments).

Marvell’s diverse revenue model remains the prime positive factor and the strong demand for its 4GLTE products could be the growth driver in the forthcoming quarters.

However, we remain concerned about stiff competition in the semiconductor market from major players such as Intel Corp. (INTC - Analyst Report), Texas Instruments Inc. (TXN - Analyst Report) and LSI Corp. . A sluggish macroeconomic environment, higher material costs and the impending damage payment are the other headwinds.

Currently, Marvell Technology has a Zacks Rank #3 (Hold).

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