* Q2 revenue guidance sends shares sharply higher
* Q1 Adjusted EPS $0.29
* Q2 rev forecast between $870 mln and $910 mln (Rewrites first paragraph, adds quote and earnings details, updates stock price)
By Noel Randewich
SAN FRANCISCO, May 26 (Reuters) - Marvell Technology Group (MRVL.O) gave an upbeat earnings forecast and said sales of smartphone chips in China were beginning to take off, sending its battered shares 9 percent higher.
“Marvell’s valuation got to a point where anything good was probably enough for its stock to go up, which is what’s happening,” said Roth Capital Partners analyst Arnab Chanda.
Marvell is racing to expand its smartphone chip sales in China as competition from rivals such as Qualcomm Inc (QCOM.O) and Texas Instruments Inc TXN.N intensifies and as key client Research In Motion RIM.TO faces pressure from Apple Inc (AAPL.O).
“In the mobile area, in addition to continuing revenues from existing customers ... we expect to benefit from strong growth in branded and non-branded TD (standard) handsets in China,” Chief Financial Officer Clyde Hosein told analysts on a conference call.
“We have seen the benefits of our early investments in TD.”
Marvell said current-quarter revenue would be $870 million to $910 million, equivalent to an 11 percent increase from the prior quarter. The average analyst estimate is $875 million, according to Thomson Reuters I/B/E/S.
Research In Motion uses processors made by Marvell in smartphones, but the Canadian company is facing stiff competition from Apple’s iPhones and mobile gadgets running Google Inc’s (GOOG.O) Android platform. RIM did not choose Marvell’s chips for its new PlayBook tablet.
The growing popularity of tablets is hurting sales of PCs and chips made by Marvell that go in their hard drives. But that softness is being offset by more sales of controllers for solid-state drives, Marvell executives said.
Hurt by concerns about PC sales and competition in mobile, Marvell’s shares had fallen 22 percent in 2011, underperforming the Philadelphia Semiconductor Index’s .SOX 4 percent rise.
The company forecast earnings of 37 cents per share for the current quarter, plus or minus a couple of cents. Analysts had expected 33.5 cents for the current quarter.
Broadening its business, the Santa Clara, California-based company has become a major player in supplying networking and storage chips for video game consoles, although that market is more seasonal and is expected to make the company’s revenue more volatile.
Microsoft Corp’s (MSFT.O) Kinect motion-sensing device for the Xbox 360, launched last year, uses processors made by Marvell, a major win for the company.
Marvell said net profit in the first quarter was $147 million or 22 cents a share, compared with $206 million, or 30 cents a share, a year earlier. Adjusted net profit was 29 cents a share.
Revenue fell 6 percent to $802 million.
Analysts on average had expected Marvell to report first-quarter revenue of $825.6 million and earnings of 30 cents per share.
Adjusted gross margins in the first quarter were 58.5 percent, below the 59.03 percent expected by Wall Street analysts.
Shares of Marvell surged 9.5 percent to $15.94 in extended trading after the earnings report. The stock had closed 2.68 percent higher on Nasdaq. (Reporting by Noel Randewich; Editing by Robert MacMillan and Richard Chang)