Marvell Sees Growth Prospects

Ace integrated silicon circuit maker Marvell Technology Group Ltd. (MRVL - Snapshot Report) seems upbeat after delivering strong quarterly results in mid-May. There have been a number of developments over the past few days that we think could attract investors.

Chinese telecom company China Mobile has recently launched a TD-SCDMA phone that uses a number of Marvell chipsets. Marvell’s offerings on the TD-SCDMA standard are proven. Therefore, China Mobile’s recent push into the area is a big positive. Particularly so, since China Mobile is one of the largest telecom service providers in a very populous region and the demand for TD-SCDMA smartphones are increasing.

Marvell is also supplying its flagship ARMADA XP processor to Dell Inc. (DELL - Analyst Report) for its latest cloud-based server offering, Copper ARM. Dell is gradually becoming a key player in the cloud space. The success of this latest product will not only push Dell ahead, but it will also open up new avenues for Marvell.

Marvell is also set to announce a host of latest technological inventions targeting smartphones, tablets and notebooks, Google TV, and cloud computing appliances in COMPUTEX Taipei, a computer expo held annually in Taipei, Taiwan. The event started on June 5 and will end on June 9.

We see these developments as the prime driving force for achieving Marvell’s upbeat guidance provided in the last quarter. (Check out the detailed second quarter guidance in the blog: Marvell Beats, Outlook Bright.).

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. (LSI - Analyst Report), significant number of pending lawsuits, higher material costs and the company’s European exposure will remain as concerns. However, we feel that a strong product portfolio, sound pipeline, a diverse revenue model, stable balance sheet, association with Google (ARMADA 1500 HD Media System-on-a-Chip for Google TV) and synergies from the Xelerated acquisition could give the company’s shares a boost, going forward.

Currently, Marvell Technology has a Zacks #3 Rank, implying a short-term Hold recommendation.