Latest earnings report from Marvell

The Six Five team talks through the latest earnings report from Marvell.

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Transcript:

Patrick Moorhead: So, the next topic is Marvell earnings. So Marvell is all in on Enterprise Data Center and the Enterprise edge. They’ve had a very… I would call it a miraculous turnaround over the last three years, under the leadership of Matt Murphy. So break down the earnings for us, Daniel.

Daniel Newman: Yeah, it was a really strong quarter, and I was really honored this week to get to spend some time with Matt. He also will be at the Six Five Summit. Who won’t be, Pat?

Patrick Moorhead: I don’t know. I mean-

Daniel Newman: I don’t know, but you should be-

Patrick Moorhead: I don’t want to namedrop, but it’s more like, it’s easier to talk about who’s not going to be at the Summit than to talk about who’s going to be at the Summit.

Daniel Newman: Yeah. I think epic is the word that often gets overused but is appropriately deployed in this case. So the company beat on both the top and bottom line again, but that’s just a small part of the story. This is a company that’s in a major transformation. I’m telling you got to listen to the session, because I really had Matt unpack the whole thing. But it was a company that flipped from a company that was making chips at low margins in the consumer space. And over the past several years under Matt’s tutelage and his leadership, completely pivoted the company, got into automotive data center cloud, and made a number of big acquisitions starting with Cavium and most recently within Inphi. The earnings were really, really solid, but the response of the market was terrific. And the reason the market responded so well to this wasn’t that the earnings were just blown out, because they weren’t, they were good, but it was really some of the things that were said.
First of all, the company’s dealing really well with all the supply issues, and a lot of Marvell’s chips fall into that area that has been most impacted, that over 12 nanometer subsegment, and they’re managing it very well. They’re hitting on their targets and they’re continuing to deliver.

But what people also really got excited about was that the company has historically reported in a way that’s very confusing, basically breaking all its revenue into two categories, storage and networking. And for the first time, and going back into a rare seven quarters, the company is going to start reporting subsegments. So you’re going to start to see their cloud revenue. You’re going to start to see cloud data center. You see automotive, you’re going to see carrier numbers. You’re going to see networking numbers. And it’s going to be broken out in such a way where you’re going to start to see all the bets and all the investments that the company’s making and just how well it’s doing in each of these categories. As you and I have said, Pat, plenty of times when talking about cloud providers, we hate when companies report and don’t show us how numbers are breaking down. So, oh, you call it cloud, but here’s 73 things you have in your cloud number. How much are you doing? No idea? Okay. We don’t know either.

Patrick Moorhead: It’s cloud. It’s cloud, it’s cloud, okay.

Daniel Newman: Cloud, everything’s cloud. Transactional data, cloud, cloud. Anyway, but the moral is like that. Another thing that was really impressive that came out during the earnings was the Inphi acquisition began going accreted this quarter. Now, only for a small percentage of it, but most people don’t understand. Typically when you make an acquisition this large, and this is for, a company the size of Marvell is a $10 billion acquisition, big, big acquisition, adding a lot of capabilities in this data center networking business. But it actually, when it accreted for a small percentage, and by next quarter, it will be fully accreted. So in that next quarter’s result, you will fully see the impact that Inphi is having on the company’s overall numbers.

Overall, Pat, with earnings, I’ve got Marvell on the trajectory of saying, hey, this is a semiconductor company that you may not be paying attention to, because we all watch Intel. We all watch MD, we all watch Nvidia. Most of us watch Qualcomm. But Marvell is hot, it’s up and coming. It’s being selected by some of the biggest players in cloud. Some of the biggest players in networking, and some big players in automotive too. And it’s got a real big growth trajectory here. It’s got some serious TAM expansion, and it’s one of these companies, Pat, that every time you talk to them, I’m just impressed. And the results this quarter gave us no reason to indicate anything else.

Patrick Moorhead: I like, first of all, Marvell’s focus. They used to have some consumer stuff in there, and now they don’t, and they made a bunch of acquisitions, they made some divestitures. They invented the DPU appliance. They don’t get any credit for it, but they did. And Nvidia made it sexy. Intel had been doing DPUs for a long time, too, but Marvell was the first crater when it used to be an appliance versus a chip. And now they’ve got their own single or multi chip options out there.

Inphi. Inphi makes a hundred percent strategic sense, and it still does, and they did say would be accretive, and it is. There’s only two kinds of networking. There’s over light and over copper. Inphi is over light. And the rest of Marvell is copper. So this to me indicates a very big future in, and unlike other investment plays that are accretive on day one, I don’t see this as a money pit either. I don’t see anybody who is going to throw enough money in here to put enough separation where it would be a costly investment for them.

So, Daniel, great analysis of this.