August 18, 2011 / 9:00 PM / in 6 years

UPDATE 4-Marvell sees China mobile sales offsetting RIM losses

* Sees Q3 rev $940-$980 mln vs est $958.1 mln

* Sees Q3 adj EPS $0.39-$0.42 vs est $0.41

* Q2 adj EPS $0.38 vs est $0.37

* Q2 rev $898 mln vs est $889 mln

* Shares up 15 pct in extended trade (Adds analysts’ comments)

By Himank Sharma

BANGALORE, Aug 18 (Reuters) - Marvell Technology Group posted a surprisingly strong second quarter as robust sales to mobile customers in China helped it offset weakness from key customer Research In Motion , prompting the chipmaker to forecast third-quarter revenue largely above estimates.

“Most investors feared that third-quarter guidance would be much worse. They are realizing that just a few quarters ago Marvell was suffering from the fact that RIM was losing share and the stock was completely out of favour. Now, we see a reversal of fortunes,” Benchmark Co analyst Gary Mobley said.

The company said it expects to report third-quarter adjusted profit of $0.39-$0.42, on revenue of $940-$980 million.

Analysts, on average, were looking for 41 cent a share profit, on $958.1 million in revenue, according to Thomson Reuters I/B/E/S.

“Sequential increase was driven by growth from our new products such as TDMA in China ... (In the third quarter) we expect revenue from our mobile and wireless end-market to once again deliver double-digit growth, driven by TDMA,” the company said on a call with analysts.

China TDMA opportunity is huge given that China Mobile has 600 million subscribers, said Benchmark’s Mobley.

The company, which makes baseband and processing chips used in smartphones, posted an 18 percent sequential increase in second-quarter revenue from its mobile and wireless division.

RIM WEAKNESS

The market had expected the chipmaker’s mobile business to underperform on weakness at Research In Motion -- one of Marvell’s largest customers.

“I don’t think that customer (RIM) would ever be irrelevant. They will be every bit as relevant as they have been. Granted, there’s some headwinds there. Our dependence, however, on any single customer in the mobile space today is much lower than it was at any given period,” Chief Executive Sehat Sutardja said during the call.

RIM uses Marvell’s processors in smartphones, but the Canadian company has lately switched to alternative chipmakers to better compete with Apple’s iPhone and gadgets that run on Google Inc’s Android platform.

RIM did not choose Marvell’s chips for its new PlayBook tablet, its revamped line of Torch phones set for a September launch and its new ‘Bold 9900’ will use Qualcomm processors instead.

HARD DISK DOMINANCE

“They were expecting the storage business to grow only 1-5 percent sequentially. What drove the upside was increased market share at Hitachi Data Systems was quicker than anticipated,” Benchmark’s Mobley said.

Marvell posted a better-than-expected 13 percent sequential gain in hard-disk drives (HDD) business, which represents over a half of annual revenue.

“We experienced strong seasonal demand later in the last quarter, in support of the back-to-school buying season ... Marvell will benefit from the ongoing OEM consolidation,” the company said.

The company posted a second-quarter profit of $192 million, or 31 cents a share, compared with $220 million, or 33 cents a share, a year ago.

Excluding one-offs, it earned 38 cents a share.

Revenue rose to $898 million.

Analysts, on average, had expected a profit of 37 cents a share, on revenue of $889 million, according to Thomson Reuters I/B/E/S.

Shares of the company, which have lost over 30 percent of their value since the beginning of the year, were up 15 percent in extended trading. They closed down 7 percent at $11.97 on Thursday.

(Reporting by Himank Sharma in Bangalore; Editing by Sriraj Kalluvila)

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