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David Einhorn Ups Stake in Semiconductor Maker Marvell Technology

July 26, 2012 | About:
Holly LaFon

Holly LaFon

250 followers
David Einhorn, head of hedge fund Greenlight Capital, made another large purchase of Marvel Technology Group (MRVL), according to GuruFocus Real Time Picks. This time he upped his stake by more than 61%, buying 11,222,932 shares on July 16. The purchase brought his stake to a total of 18,372,247 shares.

Marvell is a semiconductor manufacturer focused on Ethernet, cable and DSL-related communications devices. The company’s stock price has declined 26% over the last year and about 18% year to date.

Global semiconductor sales in May reached $24.4 billion, a 1.4 percent increase from $24.1 billion in the previous month. Overall sales for the quarter ended May 31 were up 6.4% over the previous quarter ended February 28, the highest rate since June 2010. May was also the third consecutive month of increased sales, the longest period of increased monthly sales since September 2010. Year over year, however, May sales were down 3.4% and 2012 year to date sales were lower across all regions than the same period in 2011, according to the Semiconductor Industry Association.

“The upward trend of global semiconductor sales is encouraging,” said Brian Toohey, president and CEO, Semiconductor Industry Association. “Recent sales totals are in line with industry projections of modest growth for the remainder of 2012, but a sluggish global economy continues to provide substantial headwinds, limiting more robust growth.”

In May, Marvell posted better-than-expected quarterly results. Its GAAP net income was $95 million, or $0.16 per share (diluted), and $147 million, or $0.22 per share (diluted), for the first quarter of fiscal 2012. Revenue increased 7 percent sequentially and was down slightly year over year.

The results were driven by better-than-anticipated growth in its TD smartphone products and increased deployment of its 500 gigabyte per platter mobile storage solutions to all disk drive manufacturers.

Einhorn commented on Marvell in his second-quarter letter: “Marvell Technology Group (MRVL) was the other significant loser, as its shares fell from $15.73 to $11.28 during the quarter. MRVL gave tepid guidance and Wall Street has modestly reduced its estimates of earnings per share from $1.25 to $1.15 this year and from $1.45 to $1.40 for next year. MRVL has about $4 per share in cash and now trades at roughly 5x next year's earnings net of the cash on the balance sheet. Most of the cash is excess, and the company has commenced what we hope will be an aggressive share repurchase program. We have used the reduced stock price as an opportunity to increase our stake in the company.”

In addition to the stock repurchase program, Marvell in the second quarter commenced paying a quarterly dividend on $0.06 per share.

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