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Technology Stocks : Marvell Technology Group {MRVL}
MRVL 64.87-4.1%Jan 27 3:59 PM EST

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From: Petz6/27/2006 7:09:49 PM
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Acquisition from Intel is an awful deal:

Is Marvel overpaying for XScale? I'm trying to back into exactly what Intel is selling for $600M and its sales.

Apparently it is the XScale and mobile phone processor/chipset business, but NOT including Flash. That would be the old WCCG group minus Flash.

WCCG was last broken out in 12/03 and it totalled $469M. A year later Intel told us that $399M of that total was "flash memory." So revenue was $70M in Q4 2003. To quantify it another way, it was 6.6% of the total revenue (WCCG 469 + ICG 592) of the two segments that now make up the Intel "Comm" group.

So if we assume that XScale sales grew 50% in the past 3.5 years, we get a trailing 12 months sales estimate of 1.5x$70Mx4, or $420M. If we assume 6.6% of trailing 12 month Communications revenues, we can only estimate 2004, because Communications wasn't reported after that. For 04 we get 5,027x0.066=$332M. Intel reported some big gains in cell phone processors in Q1 2005, so I think $420M for trailing 12 months revenue is reasonable. A final way to get a high-end estimate for sales is to assume that its employees are as good as the rest of Intel in revenue per employee. That is almost certainly NOT the case, since overall gross margin is 40% but way worse than that at Intel's non-core business.

So, CANCEL ABOVE, Forbes just told everyone it had sales of $400M and 1400 employees - see forbes.com

OK, so why are they paying ~1.5 x Sales for a business that is not making money and has never made money. They aren't even getting production capacity! Next chipset crisis? Goodbye PXAxxx, sorry Marvel. How could they be so stupid?

Petz

BTW $400M/1400 employees = $280K/employee
Average for all Intel ~= $350K/employee
Average for AMD (2005) = $593K/employee !!!!!!!!!

Petz
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