Good day, ladies and gentlemen, and welcome to the Marvell Technology Group's Earnings Conference Call for Fiscal Fourth Quarter 2011. I'll be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to Marvell's Vice President and Corporate Controller, Mr. Brad Feller [ph]. Please proceed, sir.

Thank you, Derrick, and good afternoon. Welcome to the Marvell Technology Group Fourth Fiscal Quarter and Fiscal Year end 2011 Earnings Call. I am Brad Feller [ph], Marvell's Vice President and Corporate Controller. And with me on the call today is Dr. Sehat Sutardja, Marvell's Chairman, President and CEO; and Clyde Hosein, Marvell's CFO. We will all be available during the Q&A portion of the call today. If you have not obtained a copy of our current press release, it can be found at our company website under the Investor Relations section at www.marvell.com. Additionally, this call is being recorded and will be available for replay from Marvell's corporate website. Please be reminded that this call will include forward-looking statements that involve risks and uncertainties that could cause Marvell's results to differ materially from management's current expectations. The risks and uncertainties include our expectations about sales of new and existing products and general market trends, statements regarding our financial projections for the first fiscal quarter of 2012 and our expectations about long-term growth. To fully understand the risks and uncertainties that may cause results to differ from our outlook, please refer to Marvell's latest quarterly report on Form 10-Q and subsequent SEC filings for a detailed description of our business and associated risks. Please be reminded that Marvell undertakes no obligation to revise or update publicly any forward-looking statements. During our call today, we will make reference to certain non-GAAP financial measures, which exclude stock-based compensation expense, as well as other charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discreet events that management does not consider to be directly related to Marvell's core operating performance. Pursuant to Regulation G, Marvell has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in Marvell's fourth fiscal quarter and fiscal year end 2011 earnings press release, which has been furnished to the SEC on Form 8-K and is available on Marvell's website in the Investor Relations section at www.marvell.com. I would now like to turn the call over to Sehat.

Thank you, Brad, and good afternoon, everyone. Today, we reported fourth fiscal quarter 2011 revenues of approximately $901 million, reflecting a 6% sequential decrease from the prior quarter and a 7% increase over the same period a year ago. We also reported GAAP EPS of $0.33 per share and non-GAAP EPS of $0.40 per share. For fiscal 2011, our revenues were approximately $3.6 billion, an increase of 29% as compared to fiscal 2010. Full year GAAP EPS was $1.34, an increase of about 150% year-over-year. Non-GAAP EPS for the year increased 66% to $1.64 per share from the $0.99 per share in fiscal 2010. Full year free cash flow was $1.1 billion, up 43% versus the year ago period, representing a 30% free cash flow margin. Our profit levels and free cash flow levels in fiscal 2011 are the highest in the history of the company. Our performance over the last two years clearly demonstrates our ability to generate solid profitability and cash flow. So let me summarize our results across our end markets. First, in our networking end market, Q4 revenues were approximately 18% of our total revenues, essentially flat with the prior quarter and consistent with our earlier expectations. It appears that the inventory issues we experienced last year in this end market are largely behind us, and we should be shipping to end market from this point on. Looking forward to the next quarter, we expect revenues to be flattish sequentially in what is otherwise a seasonally low quarter. For fiscal year 2011, revenues from our networking end market were about 19% of our total revenues and up approximately 15% year-over-year. We had an excellent year in our networking end market in fiscal 2011 although the inventory correction during the year did have some impact. We expect…

Thank you, Sehat, and good afternoon, everyone. As Sehat mentioned, fiscal Q4 revenues came in at approximately $901 million, representing a 6% sequential decrease for fiscal Q3 2011 and an increase of 7% from the same period a year ago. Our overall revenue performance was at the lower end of our prior forecast. As Sehat indicated earlier, revenues in our mobile and wireless and stores end markets were lower than our expectations. Our non-GAAP gross margin for the fourth quarter was approximately 59.4%, essentially flat with the third quarter and about 60 basis points lower than the same period a year ago. This was at about the midpoint of our earlier projected range of 59% to 60%. Our overall operating expenses for the fourth quarter on a non-GAAP basis were approximately $269 million at the higher end of our earlier forecasted range of $260 million to $270 million. As compared to the same period a year ago, overall expenses were about 13% higher as we prepared for the launch of several new products coming in fiscal 2012. R&D expenses for the quarter were approximately $210 million, up about 6% from the last quarter and up about 12% from the same period a year ago. This was slightly higher than our forecasted range of $200 million to $205 million. For fiscal 2011, R&D expenses were also higher by about 12% year-over-year. The increase in R&D expenses was due to higher headcount and new products introduction expenses as we ramp up to support new customers and designs in the coming year. SG&A expenses for the quarter were approximately $59 million, slightly lower than our prior forecast of $60 million to $65 million, lower by about 4% sequentially and an increase of about 16% year-over-year. The SG&A expenses reduction during Q4 was primarily…

[Operator Instructions] And the first question will come from the line of Sukhi Nagesh from Deutsche Bank.

Clyde or Sehat, the question is on mobile. Obviously, the outlook there is a lot weaker than we anticipated. Maybe you can help us understand if your customer, largest customer there did not move to the VMI, what would've been the positive impact to your Wireless business for the quarter there? And then again, you mentioned that the mobile and wireless will potentially start to grow again. Would you like, or can you maybe help us understand how we should be thinking about it beyond the April quarter here?

It's difficult to differentiate the difference between the hub and the shift to 2.5G-only products because they're all somewhat intermingled. We did iterate on the call that we expect that end market to show growth in the next quarter, and I think we also said that this should last maybe a quarter or so at this particular customer. So I think we expect decent growth in the next quarter, but consistent with our practice, we don't want to provide any specifics.

And then just to follow up on the operating expense front, you've traditionally talked about how for every $3 of revenues, you'd be spending a $1 on OpEx. How should we be looking at that moving forward, especially in light of the OpEx increase for the current quarter?

Fair question. I've always reminded folks that was to be measured not on a quarterly basis but an annual basis. And I think if you look at fiscal '11, for example, our revenues increased 29%, and I think other expenses decreased far less than that ratio. So I think we'll accomplish that. Sehat has been very clear about investment. We invested for the long term. These are near-term effects and it's not possible to be dial in OpEx growth or decline consistent with the revenues. I think if you do that, that would be a recipe for disaster for longer-term growth. So I don't think you want to manage that on a quarter-by-quarter basis in that respect. It's not that quite a variable model. Having said that, the increases that we are looking at right now geared to the products that Sehat indicated in his prepared remarks earlier and we do these stuff as near term. It's consistent with the answer I gave you earlier about we expect revenue growth in Q2. So it's not like we can defer engineering team, and field and sales team it takes to bring a lot of these things to market. For example, the TD phones are just beginning. So we do need to invest in that area.

Significant investment?

Yes. We are very comfortable with the long-term metrics that we've provided.

Many of the products that we're building especially to address these smartphones markets requires a lot of significant investments ahead of the revenue. So let me give an example, the TD smartphones itself alone requires significant investment, requiring lots and lots of human capital, as well as technology investments. And we start seeing that, the result of that investments, as I said earlier, are of the more in the dozens of design wins. They're for people, they're building TD smartphones. And by the way, this is a high-end as well as medium smartphones initially. ASUS just happened to be the first one to be introducing, but you'll see more and more of the introduction in the upcoming quarter and two. So every one of this customer requires huge amount of supports. The beauty is, all the supports and all the solutions come from us. We provide all the protocol specs, the RF, the PMICs, the audios, the Wi-Fi combo, all the softwares needed to make things happen, the porting, the Androids software and now with the Kinoma platforms supporting the Kinoma platforms to those solutions, so that our customers will have less headaches to deploy these phones to the market. So again, as I said earlier, as we'd be able to reduce the cost on these devices within the coming year, we will be able to reduce these costs so that these devices, same devices, can go into to address the feature phones. That's for next year. And then we'll move along to the 978 device to address the high-end markets for the next year.

Your next question comes from the line of Sanjay Devgan from Morgan Stanley.

I was just hoping you could touch on Hitachi and how the ramp there has progressed. How we should kind of view that in terms of why we're not seeing a bigger contribution? And if you can also talk about the other major customer coming on, on the HD side kind of timing of the ramp and how we should you kind of view that progression?

Sure. The HD/SD Hitachi is one of the two new large customers that I mentioned in my remarks that we've been working on for the last year. So we've been working with them on delivering multiple, multiple means more than two new, devices last year. I don't have it with me whether it's three or four new silicons for them, but it's definitely more than two devices to address multiple new programs, and these are for a single high device as well as multiple -- single platform devices as well as multiple platform devices to address full range arrange of storage capacities, so including 7-millimeter hard drives as well as the traditional 9-millimeter hard drives from that 9.5-millimeter drives. So we are really excited actually about the work that we have done with them. So a similar thing is we added Seagate, so we're also been looking very hard to address this. I cannot give you too much color into it that yet because some of these devices are just about to be introducing to the market. But as far as Hitachi, they've already introduced some devices into the market. You can see that some of the drives and they are ramping up and thing as usual. As we said earlier -- as we have said for many, many years, this thing takes some times. It might take several quarters, it might take three quarters, it might take four quarters to fully ramp into full production as this customer replace -- fully ramp up and replace the traditional lower end, lower-capacity devices. So the good thing is, as usual, the drive capacity will increase and we are on the new capacity generations. So as the old capacity generations ramp down, okay, the only solutions that came from us, so that's the beauty of it. So the RAM is just coming.

Your next question comes from the line of Nicholas Aberle from Janney Capital Markets.

Just back on the mobile wireless subject, you couldn't really break down the shortfall relative to the mix and what's going on in the hub. Could you quantify maybe what portion of the business is being impacted by seasonality versus what's going on at the specific customer?

That's kind like the same thing, Nick. There's a lot of moving parts in there. It's with a minimum amount in our Q4 results, obviously, a big amount this quarter, it's obviously difficult to quantify seasonality versus hub.

They intermingle.

Yes, they're connected. They're intermingled and connected. But I would reiterate we do expect this end market to grow and that customer to grow.

So how do we think about the transition on the mix side to 2.5G? Is that something that's going to be permanent now or do you look for it to switch back as we move through the balance of the year? How should we be thinking about that?

Okay, the 2.5G is one that we did not anticipate early on. In fact, many parts of the world are still using 2.5Gs and yet while traditionally, they were only being served with feature phones, more and more of these parts of the world they are demanding smartphones. So this is an area that we are decided now to fully address to provide solution for these markets. Now we do have solutions, okay? We are now just pushing it to the market, and we expect to participate into this market in the next couple of quarters or so as the devices are qualified to the market. So I do expect this. It is a short-term issue to us.

And then on the hard disk drive side, as you guys said, I mean, it's been a couple of tough quarters, four tough quarters in a row. Do you think it's more, as demand waned because of the economic conditions or do you think it's secular trend within the drive space that's been kind of holding back the growth on the storage side?

On the storage, the unit growth actually -- when we report the numbers, we report the dollars. So within that reported dollars numbers, actually, the growth of the unit actually is bigger than the dollar. So really, there's still quite a bit of growth in that market, not as much as what we used to see in the past. So a part of it is related to, I guess, the economic condition in the world. Still many parts of the world are still under distress, so the consumption of PC may be somewhat muted. Part of it is, a small percent of this could be related to some people buying smartphones or buying a little bit of tablets, so there are some cost correlation. And part of it's also because at a certain small percentage of the market people are starting to use SSD, which we do participate as I mentioned earlier in my remarks. We have numerous design wins for our SSD controllers for the Tier 1 markets. And I can only imagine that these types go into high-end laptops, which obviously, will take some of the markets in the HDD. But this is an area that we'd participate, so we don't really care one way or the other which way it goes.

Nick, if I may add to what Sehat said. I understand, but I think we all follow the PC space a year ago as we discussed earlier in the call there was inventory correction went to end market fairly quickly. There's been product transitions that the PC processor level. Sehat alluded to that earlier. So there's a lot of moving parts here. I think all of these things are contributed to the current environment. I think what you see from us is probably better than what you might -- one might expect to see, but part of that is the ramp-up in new customers, as well as helping us out. So I think there's a number of things that's happened over the last three or four quarters at PCs. I do think with new processor technology coming, inventory should clear out, and I think we'll be get to more stable environment, albeit these assets, probably more subdued than in the past but I think everyone expect that now.

Maybe I can add a little bit more color to this. Specifically, with this quarter, with the delay of the shipment of this PC platform, there's a certain destruction in the supply chain. Many of the PCs are built-in or laptops built in Asia and ship over the shipping lanes. And these are traditionally, this is what's done to reduce cost of the transportation. But because of the delay in the shipments of the new PC processor, the supply chain will get disrupted for about maybe two weeks, maybe two and a half weeks or so. And therefore, specifically this quarter, our customer indicating that sometimes these two weeks or two and a half weeks of supply chain disruption does create an issue with the Storage business temporarily.

Your next question comes from line of Harlan Sur from JPMorgan. Harlan Sur - JP Morgan Chase & Co: Clyde, you mentioned the accelerating revenues in your total business beyond the April quarter, and I know that you also mentioned wireless being up in the July quarter. You should have visibility now. I mean, is your order and sort of backlog visibility already giving you a high level of confidence about growth in the total business for the July quarter?

No, it's less orders because people don't give orders. There's some, but if you look at -- when you analyze the reasons why we declined, a fair amount of that was seasonality. So for example, I think it's well documented we have north of 70% share of the gaming given systems while typically build up in our Q2 and Q3 and then drain that out for the first half. So that's a part of it. Second part of it and I think this is a non-trivial part is to ramp-up some of these new devices. Sehat alluded to and it's public now that ASUS has launched a couple of devices. We indicated earlier that there are number of those devices that should come in the next few months. And so new product introduction, which we have a fair amount of clarity will create growth is probably the other area that gives us that confidence. Some of the customers are well known to you. Once they go public, we can talk about it. Some we have to keep quiet until they go public. So it's a combination of seasonality which has caused -- subdued early areas and the new products related to some of those customers, as well as new areas and new customers ramping up in the next term that gives us that confidence.

I do want to add some. I've personally seen many, many of these handsets of myself on my hands playing around this new TD handsets for the China market. So I do feel comfortable that these products will shift in the next quarter or so as the devices are being qualified by the carrier. So there's a good thing if devices are there, so they're just the qualification stage needs to be completed and then the order will automatically come. And because of this, we need to be prepare for building the inventory to anticipate for this ramp. Harlan Sur - JP Morgan Chase & Co: And then my follow-up question is the team has had, obviously, a very good relationship with RIM for many years now. I'm just trying to figure out what was the rationale for the transition to a hub base model now. Is it just simply because Marvell is just the much larger partner into RIM? I mean, is it that simple? And then on that same front, just want to make sure that on the 3G side, that you guys still believe that you retain 70% market share of their non-CDMA product lines now and also going forward?

So we said before, this is not a design win or design loss issue, so the things we've said in the past continued to play out. In terms of the timing, yes, we are a much bigger player with them. I think our revenues last year and our performance last year shows that. It's been discussed for a while. I think what creates the timing is given the mix right now, we decided might as well get it over with and not have to deal with that. I think at some point, we realized that was inevitable to go there. We might as well deal with early, put behind us and move on and deal with other issues. And so that probably more influenced the timing more than anything else.

Your next question comes from the line of Craig Berger from FBR Capital Markets. Craig Berger - FBR Capital Markets & Co.: I guess the big picture question is if I look at your revenues now versus where they were, say, a few years ago, there really hasn't been that much growth and that's severely underperformed versus peers. And I'm just wondering what needs to change? Is there something broken? Is there something broken within the processes with the investment areas? Maybe you can help me understand the big picture about why growth is going to proceed now where it hasn't in the past.

Craig, I understand that people say that, but the mix of our products over the last few years is much different. I think early on this call and a number of people have written about some of the issues related around the PC market. And of course, having 60% share of the drive business we are subject to that and we are subject. So I think when you look at it, you got to look at the mix of the products. As Sehat and both I indicated earlier, our Networking business last year grew 15%. We certainly expect that to grow by at least that much, maybe a little bit more this year, and that continues to grow. Our Wireless business grew over 111% last year. We expect that to have double-digit growth again this year. So I think when you analyze it, it's a very good question for people who listen to this call is to understand we are shifting our business away from PC-based to non-PC-based, and those businesses are very successful. The last thing I would add is don't judge this by just one or two quarters, and we're talking about Q4 and Q1 results. I think it's unfair to judge those by those results. But if you look at the product mix and you look at the product lineup we've got, I think we've transformed this company substantially, and I think we will grow in all the right places. We dominate in one area, i.e., PCs that's been somewhat subdued, you're going to have to live through that. I think we've done that very well and generated a lot of profitability and cash flow through that transition. Craig Berger - FBR Capital Markets & Co.: So then as a follow-up, maybe a couple of programs we've talked about before where some of the China Mobile OPhone programs and also Seagate have to start ramping on the HDD side. Is there any way you can help us quantify those opportunities in this calendar year towards scaling to that 20% to 25% annual growth target you guys are shooting for?

On the China Mobile, of course, we have an idea. The problem with new product introductions in a new country with smartphones, it's difficult to predict and then people get latched onto that and you get measured against that. We have, I think, Sehat indicated one of a dozen customers that are on for this TD. We're very excited by it. Whether it's single-digit millions or double-digit millions, it's hard to say. But it's certainly finish [ph] a plus million have been throwing around for this opportunity, and we have the lion's share of that. Whether that's going to play out or not, there's a lot of moving parts to that. Same thing is with our drive customers. They have started ramping. The things we control is the products. We discussed earlier about a number of products in there. We are confident that in months, if not a quarter or so, we will serve all areas of the drive market, and that's very confident we will do that. But the recent piece of that ramp front is difficult to predict.

I guess instead giving you what the unit numbers that is possible with the OPhone or simply any other OS for the TD markets. Let me give you a number, the pricing of those phones. Last year, when they introduced the first-generation OPhones, the first-generation OPhones were selling for $300, $400, even $500, U.S. dollars. I mean, not Chinese dollars, price point, and you can see there that kind of price points, the volumes, it will be limited. In contrast, today, the 920 devices are targeted for TD smartphones, and these are high-end smartphones targeted for prices the range of $100 to $150 smartphones. So now, we just need to figure out. The time will tell what will be the difference in the volumes of the TD smartphones when it's priced between $100 to $150 versus when it was priced at $300 to $500. Craig Berger - FBR Capital Markets & Co.: Can I just ask one more? You've been talking about these Seagate wins and some of those China Mobile OPhone stuff for almost three years now. And I guess my question is, did you start talking about it too early? As the programs delayed, technology delayed, what has changed versus expectations back in fall 2008 on those programs?

Let me address the China phone. You could argue whether we talked about it earlier or not, that's a fair question. But there are some challenges. The underlying Android platforms had gone to 11 generations that caused people to delay with any new product and any new technology, you always have issues. TD is relatively new certainly in smartphones. So arguably, there were delays, but I think that we've got to look at the positive side. We have one customer announce it last Friday. That's the beginning of it. This stuff is real. This is not fiction in front of us, so this is not a promise of thing. This is real, and we think this is near term, and we can see on this call it has started. And that's the meaningful difference here, Craig.

Your next question comes from Uche Orji from UBS.

Can I just switch gears and ask you about Networking. And within your flattish guidance, can you talk about trends within the subsegments, carriers, enterprise, small and mid-sized businesses, what are you seeing there that were of demand? Which areas are stronger? Which areas are weaker?

We play mostly in enterprise, Uche, so our presence at carriers and within small businesses, it's hard to say, but I'd lean our comments more on enterprise. It's hard to differentiate whether small business or not, at least I couldn't do it here for you in the call. So I would characterize the stuff as more enterprise. I think I said earlier that -- but in the middle of last year, there where some well-documented inventory issues I believe. We said then that it will take about two quarters, and it's taken two quarters. And now we're seeing that behind us and it's a little better than seasonal.

I also know you did have some business with data centers, and the reason I ask is because that's a very strong comments of Internet traffic driving strength in data centers. Are you seeing the same thing within your Networking business?

Yes, I think that's probably where -- whether it's cloud-based or data center-based, I think that's where you will see some of the existing stuff. But we indicated -- Sehat indicated earlier that we expect next year our GPON/EPON combo devices to start taking off. That's of course related to slightly different part of the business. But the existing business today, I think, you'd see the data center spending probably increase in part because of the cloud phenomenon.

So there are people building new base stations as they are starting to move to 4Gs, they need much higher throughputs in the backbone. So those are being built using higher port coms, 10 gigabits backbones.

A different question. SSDs and hybrid products that you talked extensively about this, Sehat. When should we start to see this actually gets shipped and when should we think it will be material contribution to revenues both for Marvell and possibly for the industry? And can you comment as to what your market share is in SSDs and also if you can tell us what the relative contribution to both pricing and margins compared to hard disk drives?

Sure, as I mentioned earlier that last year, our SSD revenue doubled. And I also mentioned that this coming year, it will also double at least, at least also double. And this is just for the products that we built, okay, for the stand-alone, high-performance SSD Controller. So this does not include the devices that I also mentioned earlier about the hybrids. The hybrids is a new device that we just recently introduced because we started to realize that at the price point of this SSD controller, only a small percentage of the market can afford to have SSD. Here, everybody wants to have their laptops to have SSD if it comes for the same price for a drive, a regular drive, but it's not going to happen in the next five to 10 years. So instead of waiting to that for happen, we proactively look into what we can do to make these laptops to have essentially similar performance of an SSD, maybe a little bit less by giving them smaller capacity and use a hybrid solution, combine it with the traditional HDD and resulting in a tenth of the cost or 1/8 of the cost of fewer SSD. We're talking about not half or like 1/8 of the cost. So this is like a major cost saving. But as anything, technology is not so easy to deploy. So we're looking with our customer to deploy some of this solution into the market. So we expect this to be more -- the hybrid to come a little bit later. So in the meantime, the traditional SSD, there's still a lot of headroom for the market to grow as some of the flash, the multi-bit, the 2-bit, as well as the 3-bit cells are being introduced into the market. This will somewhat reduce also the 2x nanometer flash starting to come out in the market. It somewhat reduced the cost a little bit, but it's not enough to create a huge volume increase. So that's why we're forecasting like double or more than double not 10x. If you look at the volume, the volume is still quite low. So the prices, it could be 2x, it could be 10x increase, but it's not going to happen anytime soon.

One last question will come from Chris Caso from Susquehanna Financial Group.

If I can just come back to the handset again and just to understand correctly. I know you've tried to answer it a couple of times, but is it correct to say that at least some part of that down 20% that you're seeing this quarter comes back to you over the next two quarters or so, but I guess you guys are saying you don't know the magnitude of that how much that comes back? Is it the right way to think of it going forward?

Correct, yes.

And I guess what depends on how much of that comes back it depends upon the mix between 3G, 2.5G on the product line going forward?

Less on that. There are also new programs going on, on 3G. The newer 3G phones are also being built at lower cost, so they will also address some of these emerging markets. Now of course, as I mentioned earlier, we also like to participate on the 2.5G-only smartphone markets because some of these markets where the infrastructure is still completely still on the 2.5G networks, yes, they want to have -- consumers still wants to have smartphones not just entry-level smartphones, also advanced smartphones, we also want to participate in that. So we have solution for that, and that will probably take like two quarters or so to materialize.

I'd like to thank everyone for their time today and their continued interest in Marvell. We look forward to speaking with you in the coming months. Thank you, and goodbye.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.