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Marvell Plans Non-Core Asset Sale, Job Cuts to Lower Costs
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Marvell Technology Group Ltd. (MRVL - Free Report) is contemplating the sale of its non-core assets and plans to eliminate around 900 of its global workforce to reduce operational costs. These restructuring actions are expected to be completed by the end of Oct 2017. The move is a part of the company’s efforts to streamline its operations, maintain competitiveness as well as profit margin and lower costs.
These job cuts are the result of a corporate restructuring that is expected to lower operating expenses by approximately $180-200 million on a yearly basis once executed. Marvell expects to incur total charges of $90-110 million as part of the restructuring plans over the next four quarters.
In relation to the divestment of the non-core businesses, the company plans to sell its assets with about $60 million in operating expenses and $100 million in revenues. The completion of this restructuring plan will reduce yearly operating expenses in the range of 820 to $840 million from the current annual rate of $1.08 billion.
Per Matt Murphy, Marvell's President and Chief Executive Officer, "These are difficult but necessary changes." Further he said, "I'm confident these actions will yield a greater return on our R&D investments, deliver the innovation our customers need, and generate the value our shareholders expect."
We believe that this is a strategic move on the company’s part given IoT’s [Internet of Things] potential. Research firm IDC quoted the Wall Street Journal that the market could nearly triple, going ahead. In 2014, the global IoT market was worth $655.8 billion and might hit $1.7 trillion by 2020. In its Jun 2015 report, McKinsey Global Institute projected that IoT applications could generate as much as $11.1 trillion every year by 2025. Marvell’s efforts to capitalize on the emerging opportunities are encouraging. We believe that these initiatives will provide the company with adequate growth opportunities in the long run.
Furthermore, the anticipated annual reduction in operating expenses from the recent restructuring initiative can be diverted toward improving cloud infrastructure and applications, which are expected to drive the company’s top line, going forward. The resultant savings can be redirected to more profitable markets to pave the way for more profitable growth in the long run.
Marvell is looking to boost its earnings going ahead, which will increase investors’ confidence. Reducing operating costs is one of the strategies that the company has undertaken to achieve the same. However, whether this Zacks Rank #2 (Buy) stock can succeed in its plans remains to be seen. Moreover, macro headwinds and stringent regulations coupled with competition in the semiconductor market from major players such as Intel Corp. (INTC) and Texas Instruments Inc. (TXN) remain headwinds.
Cirrus Logic has a long-term expected earnings per share growth rate of 12.93%.
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Marvell Plans Non-Core Asset Sale, Job Cuts to Lower Costs
Marvell Technology Group Ltd. (MRVL - Free Report) is contemplating the sale of its non-core assets and plans to eliminate around 900 of its global workforce to reduce operational costs. These restructuring actions are expected to be completed by the end of Oct 2017. The move is a part of the company’s efforts to streamline its operations, maintain competitiveness as well as profit margin and lower costs.
These job cuts are the result of a corporate restructuring that is expected to lower operating expenses by approximately $180-200 million on a yearly basis once executed. Marvell expects to incur total charges of $90-110 million as part of the restructuring plans over the next four quarters.
In relation to the divestment of the non-core businesses, the company plans to sell its assets with about $60 million in operating expenses and $100 million in revenues. The completion of this restructuring plan will reduce yearly operating expenses in the range of 820 to $840 million from the current annual rate of $1.08 billion.
Per Matt Murphy, Marvell's President and Chief Executive Officer, "These are difficult but necessary changes." Further he said, "I'm confident these actions will yield a greater return on our R&D investments, deliver the innovation our customers need, and generate the value our shareholders expect."
We believe that this is a strategic move on the company’s part given IoT’s [Internet of Things] potential. Research firm IDC quoted the Wall Street Journal that the market could nearly triple, going ahead. In 2014, the global IoT market was worth $655.8 billion and might hit $1.7 trillion by 2020. In its Jun 2015 report, McKinsey Global Institute projected that IoT applications could generate as much as $11.1 trillion every year by 2025. Marvell’s efforts to capitalize on the emerging opportunities are encouraging. We believe that these initiatives will provide the company with adequate growth opportunities in the long run.
Furthermore, the anticipated annual reduction in operating expenses from the recent restructuring initiative can be diverted toward improving cloud infrastructure and applications, which are expected to drive the company’s top line, going forward. The resultant savings can be redirected to more profitable markets to pave the way for more profitable growth in the long run.
MARVELL TECH GP Price
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Bottom line
Marvell is looking to boost its earnings going ahead, which will increase investors’ confidence. Reducing operating costs is one of the strategies that the company has undertaken to achieve the same. However, whether this Zacks Rank #2 (Buy) stock can succeed in its plans remains to be seen. Moreover, macro headwinds and stringent regulations coupled with competition in the semiconductor market from major players such as Intel Corp. (INTC) and Texas Instruments Inc. (TXN) remain headwinds.
A better-ranked stock is Cirrus Logic Inc. (CRUS - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Cirrus Logic has a long-term expected earnings per share growth rate of 12.93%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>