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Thursday, August 28, 2008

Marvell (MRVL) 2Q:2009 results

Marvell beats revenue estimates by about 9 mil and beats gross margin estimates by almost a percent. Non-gaap EPS are 3 cents better than consensus.

Marvell's good fortune seems very out of line with the ills of their hard drive customers and I would not buy the stock despite the upside. Hard drive controllers are the major driver of business for Marvell -- Seagate and Western Digital both pulled the reigns in pretty hard. Guidance should be conservative. If it isn't and the stock rallies, I'd short it. I have no position at present.

Dell 2Q:2009 results

Dell reports revenues ~400mm better than expected. Costs, however, rose more than sales quarter over quarter, leading to a gross margin shortfall of almost 1% (17.2% with 18.1% expected). Naturally, operating profit came in worse -- about an 7% miss eyeballing it. They say that the United States IT spending environment remains cautious and that they expect slower growth in Western Europe and several countries in Asia.

I expect the lack of the currency benefit to impact reported results for companies that saw big benefits in recent quarters -- specifically, I've cited Google, Dell and IBM as likely to look less attractive without the foreign exchange benefit. I am short Google, Dell and IBM on this basis.

Dell trades at close to 15* earnings and is growing in the mid single digits. As the economic malaise is just beginning to set in world-wide, I would expect their multiple to bleed and the stock to trade somewhere in the mid teens over time (probably lots of it).

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