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Marvell Technology Group Ltd. Message Board

  • scott4usa scott4usa Dec 27, 2012 11:15 AM Flag

    too much uncertainty

    Dividend not certain
    Cash horde not certain
    Share buyback not certain
    Ability to make certain key products not certain

    I would have answered that those were certainty days ago even knowing about this looming trial as the damages asked seemed ridiculous. The company's puff pr this morning helped me get out.

    Sentiment: Strong Sell

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    • bbmak@pacbell.net bbmak Dec 28, 2012 1:56 AM Flag

      Plus the fiscal cliff, if we go over the cliff, the stock market will be tanked.

    • So scott4usa is back. I usually agree with your points, but I think you sold too early. I was tempted to sell yesterday at 7.40 when the stock collapsed and heard about the veredict. I am now glad that I didn't. I never sell or buy if I don't do the research.... Now, going back to the original question. Is Marvell a good investment yes or not??? up until yesterday you thought it was, so this ruling somehow change your mind, so the real question you should be asking yourself is. What's the likelihood that Marvell will end up paying damages, when will they have to pay them, and how much will they pay?. This is now beyond most of us's circle of competence because we are not legal experts, but it doesn't take much research to understand that this case is a joke.
      Please check this video out:

      http://www.bloomberg.com/video/david-martin-on-carnegie-mellon-marvell-patent-case-er1U0P~yQXC616MuXqU_Hw.html?cmpid=yhoo

      All of those record-breaking huge damage awards have been overturned. So FORGET ABOUT 1.17 BILLION. FORGET ABOUT 3 BILLION. THIS WILL EITHER BE OVERTURNED, OR SETTLED FOR SOMETHING LIKE $100M (AT MAX)

      Now, on the Marvell investment itself. I am going to quote Rich Smith from The Motley Fool:

      Mooning over Marvell
      It's looking like it's going to be a rough day for Marvell Technology shareholders, as the fallout from this week's historic(ally large) patent infringement verdict continues to weigh on the stock.

      As you've probably heard by now, Carnegie Mellon University just won a $1.2 billion case against Marvell, in which it alleged (and a jury found) that Marvell had infringed Carnegie patents covering "a specific technique related to read channel detector technology." Worse, the jury found that Marvell had conducted its infringement "willfully," leading some commentators to speculate that the judge in this case could award triple damages to the university -- $3.5 billion in all.

      That's obviously bad news for Marvell, which doesn't actually have $3.5 billion handy. (It does have $2 billion in the bank, and no debt, so could probably handle the smaller verdict.) Nor has Marvell yet reserved any funds against the possibility that it will have to pay the verdict -- which it is appealing. Given the risks, analysts at JMP Securities decided that discretion is the better part of valor today, and downgraded the shares to market perform.

      Do the rewards justify the risks?
      Good question. Factor Marvell's cash hoard into its valuation, and this stock is selling for an ex-cash P/E ratio of less than 6 -- not bad for a stock that pays a 2.9% dividend yield, and is expected to grow its earnings at nearly 8% per year over the next half decade. The more so when you remember that Marvell is even cheaper than it looks, inasmuch as it generates half-again as much free cash flow ($518 million over the past 12 months) as it reports as "GAAP" earnings. Looked at that way, the stock's arguably trading for an enterprise value less than four times annual free cash flow.

      On the other hand, if Marvell does ultimately have to ante up the full treble-damage verdict, that sum would all but wipe out the company's market cap. What is the risk of that happening?

      Personally, I see the risk as slim. Consider: In a press release on the verdict today, Marvell observed that the processes Carnegie alleges it is infringing upon are "not practiced by any Marvell chips." To the contrary, Marvell argues that "the theoretical methods described in [the Carnegie] patents cannot practically be built in silicon even using the most advanced techniques available today."

      So basically, Marvell is saying that not only did it never infringe on Marvell's patents. It could not infringe upon them, because they don't work in practice. Whether or not the technology that Marvell does use today infringes on Carnegie's ideas, therefore, it seems unlikely that Marvell could have "willfully" done something that it says it never thought was even possible to do in the first place.

      Foolish takeaway
      Even if you disagree with that argument, though, the fact remains: Marvell has $2 billion in cash today. That will pay for a lot of billable hours, as the company drags out this case in the appeals process. Even if Marvell does not immediately prevail upon appeal, I suspect the company will ultimately end up settling with Carnegie for a sum lower than the original $1.2 billion verdict, and much lower than the $3.5 billion treble-damages award.

      Such an outcome would likely leave the stock selling at a discount, and make it a bargain despite this week's bad news, and despite this morning's downgrade. Some investors might be inclined to short the stock, or perhaps to buy a rival like LSI Corporation (NYSE: LSI ) , STMicroelectronics (NYSE: STM ) , or Texas Instruments (NASDAQ: TXN ) , on the theory that a Marvell preoccupied with its court case and burdened by lawyers' bills will be hobbled and unable to compete effectively.

      Me, I still think Marvell itself is the best bargain out there -- and thanks to this week's news, it's now 15% cheaper than you would have had to pay for it a week ago. That's why I've recommended it publicly on Motley Fool CAPS, and that's why I stand by the stock still.

      Sentiment: Strong Buy

      • 2 Replies to simonv38
      • Simon, the outcome of this case is like that of a 3 Stooges plot. We're talking about an obviously very liberal blue state jury here that was very much in the Christmas giving mood with our cash. That jury placed the bullet in Marvell's Russian roulette chamber. There may be only 1 bullet in the gun but the fact is this "joke" is a very real bullet with potential to zero the company. I've turned extremely bearish on Marvell because every faucet of my bullish thesis has been put into question by this one foolish jury. Every solid well known such as buyback, cash, dividend is heavily in question now. When the facts change I must change. There are other stocks without a bullet in the chamber to zero them out there that can make back my losses. There's no need for me to recover my money from Marvell by having Marvell stock go back up.

        I watched that video on Bloomberg. He seems to know his stuff. If the jury was made up of people with his knowledge then Carnegie would have been laughed out of the courtroom. The jury was made up of people that didn't want to be there during Christmas and had little to no understanding of the patents. If this were Apple or Cisco or Qualcom then 1 Billion wouldn't be a big deal and I could rationalize holding the stock but we're talking about 1/4 of the market cap with potential to be the entire market cap. I understand the desire to put on rose colored glasses but if you're going to hold Marvell you need to understand you're holding something that has a date with the grim reaper and he just might marry her. Other stocks don't have that threat. This one does and that changes as David Tepper would say "everything".

      • Company gets to Buy back shares 15% cheaper now...at best if at all 100m ...to Mellon. Actually this will work out....
        Look at all the short roaches on the board certainly bullish ...

    • good points. I doubt this will be overturned. they willfully violated the patents. the question is how much will it cost. min is 500MM (not too bad) to 3.6B (max pain). If the dividend is halted (probably 75% chance), then we drop to the 5.5-6 range. if the cash is hit to 1B or less in assets, then we go to 4. If sales warning and all of the above, 3's. If 3.6B, good night irene. this will play out next year. Dead money till the amount is set. Not sure how long that will take. Geez, I didn't even know they were sued for patent violations. If so, I would have sold in the 8.75 range and taken my lumps again.

      • 1 Reply to chevymalibu1966
      • I knew about it from the comment in Asaraf's blog. I recall Asaraf also saying he wasn't concerned with the patent suits in the comments. The timing of the "buyback" announcement is screwy .....almost makes me feel they propped it up for a seller knowing this was coming. Marvell has a history of leaking insider information and back dating options. The CFO departure is no doubt a cover up also. He probably wouldn't go along with the "family" plan to scam. I expect some class action vultures to swoop in soon but they'll have to get around the unpredictability of a Jury as a defense. That'll be yet another diversion for an already troubled company.

        I can see this at $1.98 OCZ style once the stuff hits the fan. They got caught trying to run the company like a Chinese company but that doesn't float in America. Chinese companies have no respect for patents but get away with it because they're in China. No one can properly value the company with the questions on cash, dividends, buybacks, and injunctions on no telling how much stuff. Does Marvell have a backup that works to replace the product and will companies like Western Digital stick with Marvell after this. David Einhorn couldn't hold a straight face and tell you this is a good investment after this suit. Really it should be down a lot more than it is now.

        Some guy in Asaraf's blog today told him he wasn't trying to rub salt in wounds or anything but he told him tech stocks can't be bought or sold on valuation; only the strength of the business. I really don't see were this liability has anything to do with valuation or the lack of its usefulness with tech stocks. If any strong company were hit with a suit that called into play damages that would match its market cap the stock is going to drop.

        What is the investment thesis here? Hold it and pinch your cheeks tight that another stink bomb doesn't go off? I'll pass. There should be some good opportunities soon to pick up quality companies on the DOW early next year when the can't raise taxes because it would violate my pledge to Grover Norquist bomb goes off and America gets a credit rating cut. I'll be waiting in cash to trade for quick pops in and out to make back my losses here. Investing is not something I'm going to be fond of after this burn. I'm going back to daytrading. GE at $15 anyone? Alcoa at $6?

        Sentiment: Strong Sell

 
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