Marvell Technology Group Ltd's quarterly gross margin fell as demand for its chips used in third-generation mobile communication outweighed a rise in sales of its more profitable 4G LTE chips.
Marvell shares fell 3 percent in extended trading, despite the company's better-than-expected first-quarter results.
Smartphone sales growth is shifting away from North America to China where buyers favor handsets priced below $200 over top-notch devices such as Apple Inc's iPhone.
"Our mix was more skewed to 3G even though LTE did well and our margins came slightly below what was expected in the quarter," Chief Financial Officer Michael Rashkin said in a post-earnings conference call.
Marvell's gross margin shrunk to 48.4 percent for the first quarter ended May 3 from 54.3 percent a year earlier.
The company said it expects second-quarter adjusted profit of 28 cents per share, "plus or minus two cents," and revenue of $940 million-$980 million.
Analysts on average were expecting a profit of 26 cents per share on revenue of $930.1 million, according to Thomson Reuters I/B/E/S.
"There should be a positive mix-shift in (the) July quarter, given the ramp up for 4G, which should result in gross margin uplift," said analyst Earl Hege with RBC Capital Markets.
The company has benefitted from the multi-billion-dollar rollout of long-term evolution (LTE) 4G networks in China, which accounts for a third of Marvell's total revenue.
Marvell's first-quarter net income rose to $99.5 million, or 19 cents per share, from $53.2 million, or 11 cents per share, a year earlier. Excluding items, earnings were 27 cents per share.
Revenue jumped 30 percent to $957.8 million.
Analysts had expected a profit of 22 cents per share on revenue of $892.2 million.
Marvell shares closed at $15.59 on the Nasdaq on Wednesday.
(Reporting by Sampad Patnaik in Bangalore; Editing by Robin Paxton and Joyjeet Das)