SAN FRANCISCO (Reuters) - Microchip design company Marvell Technology Group Ltd (MRVL.O) on Thursday posted a better-than-expected quarterly profit thanks to cost cuts and strong sales of wireless products, and its shares jumped 17 percent.
The company, whose chips are in Apple Inc’s (AAPL.O) iPhone and Research in Motion Ltd’s RIM.TO BlackBerry, also reported forecast strong profit margins and expected them to hold up in the current quarter.
“This is almost like the old Marvell — really a truly outstanding, superstar company,” said American Technology Research senior analyst Shaw Wu, adding that the acquisition of cell phone chip unit XScale was finally paying off.
“They ran into some indigestion with this acquisition, but now it seems like they’re getting back on the right track,” Wu said.
First-quarter net income rose to $69.9 million, or 11 cents per share, compared with a net loss of $52.8 million, or 9 cents per share, a year ago. Revenue rose 27 percent to $804.1 million and topped the company’s guidance of $785 million.
Marvell’s earnings of 24 cents per share, excluding some charges, appeared to beat the average analyst estimate of 13 cents, but it was not immediately clear that these figures were comparable, according to Reuters Estimates.
Adjusted gross margin expanded 3.1 percentage points from a year ago to 52.0 percent. Wall Street had expected 49 percent, Wu said.
Wu attributed the profit margin increase partly to new efficiencies at XScale, which Marvell purchased from Intel Corp (INTC.O) in 2006. Production moved from Intel plants to those of Marvell partners in January.
The company forecast adjusted gross margin to remain at 51 percent to 52 percent in the current second quarter but has not changed its long-term model of 50 percent, Chairman and Chief Executive Sehat Sutardja said during a conference call.
The company expects second-quarter revenue to range from $830 million to $840 million, a rise of 26 percent to 28 percent over last year, Sutardja said.
Sutardja attributed the company’s first-quarter net profit and increased revenue to reduced costs and better-than-expected sales of wireless devices.
“We surpassed our revenue targets, despite an uncertain economic environment and continuing pricing pressures in our core markets. Cost cutting initiatives implemented in prior periods also paid off,” Sutardja said in a statement.
The company will also announce next week its entry into the flash memory market.
“I view this as the biggest opportunity,” Sutardja said. “We want to put our foot in the door ... and have early traction in that market.”
Also on Thursday, Marvell named Clyde Hosein as chief financial officer, effective June 23. Hosein was formerly chief financial officer of Integrated Device Technologies. Interim Chief Financial Officer George de Urioste, in the role since January, will then serve as acting chief operating officer.
The current acting chief operating officer, Pantas Sutardja, will focus his attention on his role as chief technology officer.
Shares of Marvell closed at $14.08 on Nasdaq but rose to $16.50 in extended trade. They had not closed at that price since late November.
Editing by Phil Berlowitz