Marvell Technology (MRVL
) was our biggest loser in 2012. MRVL shares fell from $13.85to $7.26 during the year. Earnings disappointments earlier in the year were followed by an end-of-year jury verdict of over $1 billion for infringement on certain patents held by Carnegie Mellon University. Having reviewed the proceedings, our view is that this is a case of a novel interpretation of the law by a local judge, combined with a hometown runaway jury. Although the legal system is inherently a crapshoot, we think that there are many reasons to expect the award to be substantially reduced or eliminated, either by the trial judge or on appeal. There are many grounds, but one of the simplest is that most of the damages were awarded based on foreign sales that are generally not protected by U.S. patents. The jury found that since the product was “designed and tested” in the U .S., damages were payable even though the manufacturing and sales happened abroad.
Though we’d love to just admit we are wrong, sell the stock, and move on, we continue to like the opportunity here. MRVL is on the cusp of a large product transition which, to put it mildly, is not in the valuation. A year ago we were feeling pretty discouraged about our Sprint position, but we re-evaluated and determined that while the stock was down for good reason,our overall thesis was intact. It turned out to be a good decision. We have similarly re-evaluated and decided to buy even more MRVL. We expect its shares to sprint higher in 2013.
From David Einhorn
's fourth quarter letter