Q3 2021 Marvell Technology Group Ltd Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue the standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Q3 fiscal 2021 Marvell Technology Group earnings Conference call. At this time, all participants are in the listen only mode and.
For the speaker presentation, there will be a question and answer session. That's the question. During the session you will need to press star one on your telephone. Please be advised of today's conference is being recorded.
If the require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker Mr. Ashish the wrong Vice President Investor Relations. Please go ahead.
Thank you and good afternoon, everyone and welcome to more of a third quarter fiscal the 2021 on his call. Joining me today on that Murphy, Marvells, President and CEO and Jean Hu part of Seattle.
I would like and remind everyone that sort of the comments made today may include forward looking statements and just subject to significant risks and on so that could cause actual results to differ materially from management's current expectations. Please.
Please review the cost of these statements and risk factors contained and on owning specialties, which we filed with the FCC today and posted on the website and one of the most day sometime can't and Q filings, we do not intend to Oh.
During the call today because of the focus on non-GAAP financial measures reconciliations between GAAP and non-GAAP financial measures because of that but on the website.
On the Investor Relations section with that I'll touch on the call on what the most of those comes more from.
Great. Thanks, Ashish and good afternoon, everyone. The third.
The corner was an exciting and exceptionally busy time for the Marvell team since we hosted our 2020 Investor day and soon after announced plans for our transformational acquisition of Inphi.
These were both significant events, which continued to generate strong interest from the financial community.
So before I discuss our quarterly results, let me summarize the growth strategy, we articulated at our Investor day, and the benefits, we expect to drive from the combination within five.
During our virtual Investor day, we discuss the importance of choosing the right and market building a larger base of key customers and driving technology platform leadership aligned with the most exciting growth drivers and the industry.
We discussed our focus on the data infrastructure market on a $110 billion total semiconductor opportunity from our goal of which we are currently servicing 16 billion and that we expect to grow 50 per cent faster the Tam over the next few years we.
The showcase the expansion we expect the drive in our base of the tier one 100 million dollar plus customers to a total of 13 over the next couple of years we.
We outlined the evolution of our technology road map to being first to market with the five nanometer platform for portfolio wide and leadership we.
We concluded with our compelling long term growth division focused on the Fiveg cloud and automotive end markets.
At the event, we also disclose the number of new design wins, which we believe will contribute meaningfully towards revenue growth over the next several years.
On five G., we announced the second customer for OCTEON and the radio had as well as to additional base station customers for Ethernet products and the.
Enterprise market, we announced the broader footprint for our Ethernet switches and size and two tier one north American networking Oems one.
One of these Oems also selected our next generation five nanometer OCTEON processors to replace their current Xeighty six solutions across their entire enterprise router platforms.
And our storage business, we want to cloud data center of the Iwai, SSD controller and announced the new tier one NAND OEM for our merchant SSD controllers.
Consistent with the strategy, we discussed at Investor Day on October 29, we announced our plans to combine with Inphi and the highly complementary and strategic transaction and expected to expected to accelerate our growth and leadership and the fast growing cloud and Fiveg markets.
We discuss multiple benefits expected. The result from this merger, including the larger and faster growing addressable market of broadening of our tier one cloud customer base greater scale from our five and three nanometer platforms and exceptionally talented dirty steam and and even stronger long term financial model.
We also discuss significant opportunities for cross selling which would represent upside to the target operating model.
Since the announcement, we have been able to discuss the benefits of this merger with employees customers partners and shareholders of both companies.
These discussions of further strengthen our conviction and all the key strategic elements of this exciting transaction.
We've had the opportunity to meet with the broader cross section of Inphi employees and continue to be highly impressed with the depth of technical capability focused on innovation and seamless program execution.
The margolin and by teams are well aligned from a cultural perspective, with many shared values and core beliefs similar.
Similar to the approach we have taken and our prior acquisitions. We are looking forward to integrating and five employees across all levels of the combined company I can already sensed that the sales product management and engineering teams on both sides are chomping at the bit so they can start driving new revenue growth opportunities.
Let's dig a little deeper into these opportunities, which we expect will result from the strong positions established by Marvell on Fiveg.
And then find club.
We believe that having a leading products at the heart of the customers architecture is critical and it sets the cadence of technology adoption and pulls along additional products into the full solution.
We saw this play out effectively following the Cavium acquisition and you were all now familiar with the significant increase in content and customer expansion, we were able to drive and Fiveg as the combined company.
In base stations, the front mid and backhaul kind of activity is primarily optical and with the emergence of fiveg the speed and bandwidth of these.
In five high performance Pamfour and coherent DSP based electro optic solutions are perfectly aligned to deliver these higher speeds we.
We believe the Marvell leadership and embedded processor for Fiveg infrastructure will better position inphi to participate in the optical connectivity opportunity.
And cloud in five of electro optics platform is critical to data center architecture, and they have established direct relationships with the industry's largest cloud infrastructure providers.
And by the recent results and guidance illustrate the benefits of having a strong presence and the cloud market.
For the third quarter of fiscal 2020, they reported revenue growth of 92% year over year and the organic portion of their business grew 57% year over year.
Excited to see that they expect to grow growth to continue in the fourth quarter with Inphi revenue guided to grow 82% year over year at the midpoint.
Marvell also has a growing presence in the cloud market and merging with Inphi is expected to create multiple hundred million dollar plus cloud customers for the combined company.
We expect the drive numerous revenue growth opportunities for 86 and deeper use of these large club customers.
Within cloud data centers, we expect compute for AI and other use cases to increasingly required tailored solutions, resulting in an expansion of custom and basic opportunities for the combined company.
And cloud custom compute engines and Ace Ics are often connected directly to external optics, such as in the machine learning cluster.
This presents a unique opportunity for the combined company to tightly integrate optics and site Eightsix and custom compute processors to onboard and co package optic solutions cloud customers are particularly excited about this capability.
In addition to the basic opportunities I just discussed we expect similar benefits. The Marvell is cloud GPU business. The day Marvell says Gpus are smart next of standard product the cloud customers and the.
Short term, we see a greater opportunity to win more business from our existing products and the longer term, we can provide higher value VP of solutions and tightly integrated on board and co package optics.
Since announcing the deal we've completed a number of initial meetings with key customers well any detailed joint roadmap discussions will need to wait until receipt of all regulatory approvals cash.
Customer reactions from the meeting so far has been extremely positive and they have already identified multiple new opportunities from marvell and <unk>.
Jack died and personally involved in a number of these discussions and I am now even more confident and the potential for new revenue growth opportunities.
Let me move on now to our quarterly results and expectations right.
Revenue for the third quarter fiscal 2021 was 750 million growing 3% sequentially and 13% year over year stronger than expected revenue growth from our networking business offset weaker than anticipated results from storage on.
Our GAAP loss per share was three cents or.
Our non-GAAP earnings per share was 25 cents growing 19% sequentially and 47% year over year.
I'm pleased with the growth in revenue and earnings we have been able to drive and the third quarter, we are projecting strong growth and the fourth quarter as demand from customers continues to increase.
Our operations team is continuing to ramp production with our global supply chain partners. However, we have begun to experience and number of industry wide supply constraints affecting the type of high complexity products, we provide for data infrastructure.
The rapid recovery this year and the semiconductor industry appears to be stressing significant portions of the supply chain.
The supply challenges are currently limiting our ability to fully satisfy the increase in demand for some of our networking products.
Let's now discuss our two businesses the more detail.
First in our networking business revenue during the quarter was $445 million and grew 10% sequentially and 35% year over year.
Revenue growth was stronger than our expectations of mid to high single digit sequential growth and overall this was a very strong quarter across the broad base of our products and end markets, including Fiveg cloud automotive and enterprise.
Fiveg, we delivered our fifth straight quarter of sequential revenue growth.
And the first half of this year Fiveg growth was driven primarily from our ace of business benefiting from the rapid deployments in China.
And the third quarter, while the wireless infrastructure Ace of business remained strong the sequential growth was driven primarily by standard and semi custom products shipments the Samsung.
The rollout of Fiveg outside of China is starting to pick up and we expect consumer demand for Fiveg services will continue to grow worldwide. Following the launch of new Fiveg phones from Apple.
As we look forward, we expect fiveg momentum to accelerate through.
Through next year, and multiple regions, including the U.S. and Japan.
Our fiveg customer base continues to expand and the second regional customer has selected marvell is industry, leading OCTEON fusion baseband processors to power their new Fiveg base stations. They plan to engage with marvell on a variety of ran architectures, including emerging Iran initiatives, enabling them to flexibly address the needs of net.
Work operators, regardless of the network topology being deployed.
Let me take a moment the preview marvell efforts and the emerging merging open ran.
And Virtualized ran architectures. These are commonly referred to as over and and DRAM respectively.
Global operators are driving toward open standards based interfaces with the Rand to enable multivendor interoperability. In addition, the use of virtualization to separate hardware and software has begun making its way into the radio access network.
Now, whether virtual or physical the complexity of Fiveg processing real time latency requirements and the type power and below necessitate optimized hardware acceleration to do be deployed at scale.
We address this need with our OCTEON fusion processors, the industry's leading silicon platform for Fiveg base band and radio processing.
We're adding more capabilities to this proven technology to the further optimize it for open virtual environments.
We will soon unveil details of our new the ran accelerator, which is based on OCTEON fusion designed to support and open interoperable ecosystem with the full set of overran standard spaced interfaces.
By adding over in and DRAM capabilities to our existing Fiveg offerings Marvell will be the ideal semiconductor partner with the complete fiveg platform capable of supporting all ran architectures on calm and hardware and software framework.
The critical differentiator from Marvell, given that beyond a few greenfield deployments. Most fiveg networks will have a complex hybrid architecture to support a diverse set of deployment scenarios I look forward to discussing the continued the evolution of our Fiveg platform.
Moving on to our basic business benefited from strong ramp and the new cloud program. We are and we are excited about this opportunity I would note that similar to other cloud programs, we expect purchasing patterns for the new a sick to be somewhat lumpy the demand fluctuations in any given quarter.
We recently announced our 112 gig five nanometer 30 solution that has been fully validated and hardware and is ready for adoption by customers. We believe that this technology with industry, leading performance power and area will help drive 100 gig as the interconnect of choice for next generation data infrastructure or a sick businesses. The first Ben.
The fish area of this leading edge IP and I'm very pleased that we have secured a new custom ASIC design win that will embed our 112 gig Saturdays and next generation top of rack and spine switches from leading Hyperscale data centers.
Turning to our automotive business industry production appears to be recovering from COVID-19 impacts earlier and the year. We're also seeing record bookings and the started ramping multiple Ethernet design wins in model year 2021 vehicles.
Ramps drove strong revenue growth and the third quarter and we expect growth to continue in the fourth quarter and into fiscal 2022.
And our enterprise and market, we continue to refresh our Ethernet products and recently introduced the second generation of our October multi gig five family.
These are the newest additions to more bills borderless enterprise portfolio of comprehensive set of switches and five architected to address the specific requirements of emerging mobility and cloud applications that are extending the boundaries of the traditional campus environment and.
New five family offers the clear upgrade path to multi gigabit technology.
We believe that an increase and customer interest from multi gig products and our recent design win momentum our strong leading indicators that the industry is getting ready for a much broader multi gig adoption.
During the quarter, we closed the multi gig five design wins with six customers across access points gateway switches and firewalls. We are also getting very strong traction with our refreshed switches and fives with multiple security hardware customers.
Now, let me discuss the outlook for the fourth fiscal quarter for and networking business.
We expect growth from Fiveg to continue with Samsung and the start of the ramp and the Nokia partially offset by a decline in fiveg basics as deployments in China and take a pause we.
We project the strong quarter for our automotive business with quarterly revenue expected, the cross and double digit millions.
We expect enterprise switching to continue to improve as we ramp new products. We also expect growth from our Liquidsecurity deep you shipping the cloud customers offset.
Offsetting this growth we project the sequential decline in revenue from the cloudy sick.
As a result after a very strong third quarter, we expect networking revenue and the fourth quarter to be approximately flat on a sequential basis and on a year over year basis projected to grow approximately 25 per cent compared to the fourth quarter fiscal 2020 results adjusted for the divestiture of Wi Fi.
As I mentioned in my opening remarks, we are currently supply constrained on some of our networking products.
Now turning to our storage business.
Storage revenue for the third quarter was $276 million declining 5% sequentially lower expectations of being flat during.
During the quarter demand from fiber channel products from our enterprise server and storage customers was impacted more heavily than anticipated. Although we expect this level of weakness to be temporary.
On the other hand, the sequential revenue growth, we had expected from our storage controller business did materialize led by a ramp and our custom SSD controllers.
The cloud HDD business also grew sequentially.
At this year's virtual Flash memory summit, our storage team had another strong show and alongside HBI. We were named the Best of show Award winner from the Marvell based and the re boot SSD.
He is the first of Marvell partners to support this new accelerator.
Products lowers datacenter total cost of ownership by Offloading raid, one processing from costly server CPU resources.
Maximizing application performance. In addition, we demonstrated our latest the datacenter flash controller for building large capacity ultra low latency high performance Ssds and our low power 12 nanometer Pciethree genfour controllers for client Ssds.
Looking to the fourth quarter, we expect our storage business to rebound strongly and projected sequential revenue growth and the low teens on a percentage basis. We expect this growth to be driven from multiple products. The project, a strong recovery and our fibre channel business towards the more normalized run rate.
Also expect our cloud storage revenue to continue to grow which includes more meaningful contribution from our free amplifiers. In addition, we are projecting the start of of product ramp of of cloud DIY SSD controller design win I mentioned in my opening remarks.
In closing our results and guidance continued to progress in the right direction. We are projecting fiscal 2021 fourth quarter revenue at the midpoint of guidance to grow approximately 9% year over year and grow 13% year over year for the ongoing business as compared to last year's fourth quarter results adjusted for the divestiture of life.
We continue work closely with our supply chain partners to alleviate constraints and meet the growing demand from our customers.
Through this fiscal year, which is certainly had its share of COVID-19 related challenges I'm very pleased with the growth we have driven from Fiveg and cloud and it is still early days for us and these two critical end markets. In addition, our automotive and free amplifier businesses are now starting to contribute more meaningfully.
Custom SSD controller programs of recently started to ramp and we will benefit from a full year of shipments and fiscal 2022.
We also expect that our refreshed Ethernet switch and five products will enable us to take share and the enterprise and carrier and markets.
From a broader perspective, there has been encouraging news on the vaccine front, which bodes well for of macroeconomic recovery next year.
Overall, the set of for fiscal year 2022 looks very promising.
Equally exciting we're looking forward to combining within five to accelerate our joint vision to lead the ongoing transformation in the fast growing cloud and Fiveg markets.
And with that I'll turn the call over to the gene for more detail on our recent results and outlook.
Thank you Matthew and good afternoon, everyone and I'll start of the to reveal of <unk> financial results for the third club channel and then provide the our kind of outlook for the fourth quarter of fiscal 2021.
Revenue in the state of quality and was Sustainment on Jay then the sales team meeting networking represented 59% of fighting you want me to storage contributing 37%.
Driven by growth in Fiveg, and the cloud and advance given the revenue contribution from the our national account business sales nearly 60%.
And Neal record and if they're to quality.
Revenue from other content and for 4% of our revenue declined 5% sequentially and 35% year on year I think the mantra of this business. It consist of off of product and we had to stop taking less team. So we expect it will continue to decline over time.
Our guidance and for the fourth call channel anticipate the sequential growth from there I should we expect some customers to complete the last time buys on sets and component.
And last night can list of the 50.8% non-GAAP across notch and what's the 16% of revenue consistent with our guidance.
GAAP operating expenses were 300 data and the 19 the me and the include the costs the share based compensation expenses and the hit the channel from acquired intangible assets and acquisition and the divestiture the late in the call non.
Non-GAAP operating expenses were 218 medium GAAP.
GAAP operating loss was many of the non-GAAP operating profit was 193, then I'll turn the 5.7% from from Brandon.
For the sake of quality of GAAP loss per diluted share with the three cents non-GAAP net income per diluted share once the 25 cents.
Now turning to our balance sheet during the quality of cash flow from the outpatient what's the 200 at the end the safety H. moving.
In fiscal 2021, and we haven't changed and strong free cash flow come rushing over 100, and the 14% of the non-GAAP net income on a year to date the baking.
The kind of what do you mean the into shareholder interest to the dividend the payments during the quality and we pay down Hunter and meeting and allow terminal and the access to quality of 800, and the steady to meet and cash and short term investment and and the total debt outstanding of 1.8 IP and.
We continue to have the 500 and maybe an open day clinic here based up on from our Undrawn revolver.
The net debt to EBITDA ratio whats the 0.6 on a trailing 12 months the basins.
We have the temporarily suspended our share repurchase program due to the pending acquisition of <unk>.
Before I provide the outlook for the fourth quality and I remind you that on our Opex Titans. Please note that due to the typical seasonality and payroll taxes are all cash in the first fiscal quarter. It tends to increase mid single digit sequentially on a percentage of vacation and the.
The fact that if the pace in the rationale for the fiscal year.
Yes sort of specific guidance of for the fourth the quality of our fiscal 2021 were forecasting revenue to be in conventional from 700, and then 85 and medium class how minus 5%.
We expect our GAAP gross margin will be approximately 52.8%.
We project, our non-GAAP across match and it will be approximately 64%, which anticipate of favorable product mix during the fourth of quality and [noise].
And we discussed and going out and less today, we expect our non-GAAP across matching in the near future share to be in that range of the 63%. The 264 price then.
And be a part of the gravity of the makes the elfa, such and five key and the call of the products the any given quality and.
We project, our GAAP operating expenses to be approximately 300 and cemetery non meaning we anticipate our non-GAAP operating expenses and to be approximately two country the and the 18.
We expect net interest expense and to be approximately 15 meeting and non-GAAP the tax rate of 5%.
We expect our basic and weighted average shares outstanding will be 600, and the 17 free media and our diluted and they take the average of share outstanding will be 686 medium and to meet the out we anticipate the GAAP earnings per share interventional fat loss of the three cents per share on the low end.
Two and the income of seven cents per diluted share on the high income.
We expect non-GAAP net income standard share in the range of 25 cents true 33 cents.
Please note that our GAAP that goes to the S. The calculated the using basic weighted average shares outstanding when there's the GAAP net loss and the calculated the using back and went to the weighted average share outstanding when the asset GAAP net income non-GAAP diluted EPS is calculated that you're seeing that and.
And did the weighted average shares outstanding.
Operator, please open the line and announced the killed the Atens Tractions. Thank you.
Thank you, ladies and gentlemen, as a reminder to ask the question you will need to press star one on your telephone we ask that you. Please limit yourself to one question. You May then returned to the cash to withdraw your question press the pound key please stand by while we compile the Q and a roster.
Our first question will come from Toshiya Hari with Goldman Sachs. Please go ahead.
Hi, Thank you very much heard and for taking the question, Matt you talked about supply construct constraints, having some impact on your business and the quarter can you help us quantify how big the impact was on the quarter and what sort of and the assumptions are embedded in your guide and I've got a quick follow up thank you.
Sure Yeah, as we noted we have seen.
A number of constraints I would say over the last few quarters by the way and certain process node.
Bottlenecks as well as I think it's fairly widely now and there's.
Significant and significant increase in demand this year for complex substrates as well and so we've seen this tightness, we're managing through it the way I would think about it as you know we've had the historically a fairly steady level of delinquency that we enter every quarter with.
With delinquencies being defined as you know the amount of products that we have got request dates for and the current quarter end.
That we can't supply within the quarter and that's something that we track on a regular basis.
Heading into Q4 that number is significantly larger than we've had and we've we've put part of that is customers due to the constraints out there of also placed longer lead times on us. So I think we're pleased to be able to.
The guide up sequentially and certainly if you look year over year. The the business is up quite strongly overall and and especially in our networking business. So we're happy about that.
But I guess, what I would I'll I would say is you should think about it is we're like.
Like many other companies I think carrying a significantly higher level of delinquency than we have historically.
Got it. Thank you for that and then as my follow up on the storage side of the business you know the quarter came in a little bit below expectations on you spoke to the decline and the fibre channel business.
Going forward I'm, it's good to see the regarding the business up low teens and the current quarter, but beyond that should we assume kind of you know growth to be in the low single digit range consistent with what you talked about.
At your analyst day with some of the drivers like the DIY SSD controller, and the pre amps or should it should be expected to term and pretty lumpy.
As it relates the storage thank you.
Sure Yeah, no I think the thesis from Investor day, and certainly still intact and we are pleased to see a nice.
Upswing in the fourth quarter, you know understanding of the Q3 was was a little bit weaker and we did have this somewhat unusual lumpiness and fibre channel, which I think is you know historically has been a relatively stable business, but given some of the impacts earlier this year with supply chain on boards and some of the cobot day.
18 related impacts on enterprise that business did have a lot more volatility to it than we've normally experienced.
Offsetting that obviously has been very very strong growth in our traditional marvell storage controller business.
Which is by the way the business that normally has been historically, a little bit more lumpy that one's performing extremely well.
Due to this de Iwai Flash controller, and you mentioned and also our shipments of controllers and end up in cloud applications and so I think the fourth quarter is the is a strong increase and we certainly see all of those growth drivers and tap next year, we get the full benefit of that full year.
Of of the DIY shipments.
The two to our to our lead customer there.
We certainly see cloud computing growing and then we've also got share gains and pre amplifier. So I think and by the way I think from a from a fiber channel standpoint.
We do expect that in Q4 and beyond that that business.
Trends to a more normal run rate and I would expect it would not have the same level of volatility we solve the earlier. This year just given that that was primarily caused by some external shocks relative to a cove and 19.
Thank you ladies and gentlemen asked the reminder, we ask that you. Please limit yourself to one question. You May then return to the queue. Our next question will come from the the ARIA with Bank of America Securities. Please go ahead.
Hi, Thanks for taking my question My of let me press you live in the more on the supply constraint issue right just to get a sense of the others like 5 million and 10 million and 15 million of Justice. Some ballpark would help and then importantly, what does that say about your visibility heading into April you know when I look at the cut and kind of expectation.
On that on day per the therefore sort of flattish trends versus our January but you know given the visibility how should be and these on sort of fit all day look what's your deferred and glass delinquency, how should we think about seasonality heading into April so just some quantification and just some color around trends.
Moving into April and what do you really helpful. Thank you.
Sure well the first comment I think you know we're certainly pleased the Q4 Q4 is up and.
And Thats the positive it I think if I just go go back up more of a 30000 feet. You know, we're very encouraged about our fiscal 22.
The as I mentioned earlier, we've got the full year of DIY storage controller, we've got Fiveg kicking and.
There's there's there's obviously more and more growth and cloud.
And a number of growth drivers. So I think that we feel very good about for next year and then I think the the slope of that and how that will roll then some of that is going to be related to the man and some of the it's going to also be related the supply and how much progress we can make.
You know at this point, it's a little bit difficult to quantify you know.
Exactly the amount, but what I would say is.
That Directionally you know the way the business is heading and the growth drivers, we outlined at our Investor day.
It would certainly support.
The the type of.
Growth that we're anticipating next year. So I think all that positive in terms of heading into the fourth quarter and beyond but where Q1 lands.
We'll have to get get get to that you know and when we go ahead and guide that quarter I think we'll have much better visibility on on the supply dynamics, but certainly on the short term and you can see from our Q4 guide demand has been strong and and that's that's also backed up by strong bookings that we've seen as well as I mentioned we've.
Got Weve got a lot of order sitting out there that we're working very hard to go fulfill.
Thank you.
Thank you. Our next question will come from Timothy Arcuri with CBS. Please go ahead.
Hi, Matt I guess I also wanted to ask about the same topic.
And I guess I guess my question is more on timing and really when you think you'll be able to ship to demand. It sounds like maybe you're getting a little bit of the trade off here that you're getting a little more longer term visibility, but I guess my question is really when do you think you'll be able to ship to demand and.
And in the fiscal Q4 guidance does that assume the delinquencies go up versus fiscal Q3 or does it assume that they stay about the same thanks.
Yes, no. It's it looked at my true.
And I wish I could be a little bit more per precise, but I think the way to think about it is on the supply side at least when we.
When we talk to our our supply chain partners.
There is an anticipation that certainly within the first.
Quarter or two in calendar 2001.
That we will see some.
Some improvements there.
I think a lot of that though is it depends on on how strong the demand environment as certain.
Certainly it's not just discuss I think signaling that the demand is good I think other companies as well are indicating that so.
I'd just say, it's the fluid situation, but certainly we hope within the first quarter or two in the next year that we would be able to get up to that run rate.
We take our customer satisfaction very seriously and and we're all hands on deck in terms of.
How to out of meet the Rab and and I'm confident we will meet the ramp ultimately, it's we've just got to and I and I've been through a few of these since I've been and.
And in this industry and ultimately these things work themselves out of the and we've got a world class operations team and pretty tight communication with our customers at this point so you know.
It will get there.
And and I think we'll start seeing improvements and the first half.
Okay, and just to be clear, Tim just to be clear and Q4, I mean, and maybe for the Vik as well I mean, we would have guided higher in Q4, obviously had we had better access to the supply that we needed.
Yep, Thanks, Matt Yes.
Thank you. Our next question will come from CJ Muse with Evercore. Please go ahead.
And the.
Thank you for taking the question of share to beat the dead horse about what the there just curious on the supply constraints right now are there any particular products would bid and networking.
Our tighter than others and then I guess, if we can get off of the subject of.
Perhaps you could speak to and now that.
The inphi is expected to be and the full that marvell.
What are your conversations trending to now with with your lead customers. Thank you.
Sure Yeah happy to finish the beating the CJ.
But.
You know.
Really what would if you think about it and our networking business and whether that's.
Whether that's in in a six or in some of our switches or even some of our five some of these products are extremely high pin count devices in the Ics in very complex packages and.
And.
So as you go to more and more complex substrates, especially.
You could say with fiveg products or or processor products.
You know, there's just been been a number of constrains as these substrate factories try to ramp up production on on on boards and Pcbs that are.
Multiples more complex in terms of number of layers and number of pins than than in the previous generation. So I think thats, putting some constraint.
Additionally, the large fabs the large foundries out there.
Our full and in some cases, you have legacy nodes, where there's there's constraints that are a little bit unique it might may be because of who knows the last time buys I'm not sure from other vendors, but you also have some legacy nodes that actually have some impact which are a little bit of.
Q right now so it's across the board, but but again and the trend is more on the on the complex products and more around substrates.
And then your second question CJ was on and five.
Yes, that's right in terms of your conversations with your leading customers post the deal and elsewhere.
Similar to.
To what the you discussed I guess two years back with cavity and would love to hear the range.
The upstream and.
Whether engagements are accelerating because of the you know.
And in which the asset into the fold yeah.
Yeah and know that thanks, Yeah, we we've had.
I think the very strong joint engagements.
Since we announced.
The the combination and.
I would say is pretty much across the board.
There is very strong support from the customer base for this combination I think one is certainly on the Fiveg area there, they're very happy to have of.
Another strong product line to consider and we've already got some some introductions made there and then on the cloud side, which is really where inphi was.
It is very deep with a number of the large Oems I think theres very constructive discussions right now about a number of opportunities.
Number of those around basics and you know it and I think the timing of our five nanometer platform and the traction we're seeing there actually that resonates really well and in many cases some of these high performance.
We estimate six for the cloud.
They have direct interfaces to to Inphi optical modules and so there is actually a.
Fairly tights energy there between the dense digital logic type of solutions, we can provide connecting to.
Of these high performance on.
Optical modules that Inphi is enabling so it's.
The it's going very well and I think certainly as we clear the various regulatory approvals, we can engage even more deeply but but that's all going extremely well and it does remind me a lot of the the the synergy that we saw or very early on when when we did cavium and terms of the customer reception and the.
The ability to go sell of very joint solutions, So on a per.
Pretty excited about it and I think it's it's meeting all expectations or better than what I anticipated of that reaction would be like.
The group.
Sure.
Thank you. Our next question will come from Blayne Curtis with Barclays. Please go ahead.
Hey, good afternoon ethic, taking on.
Question, and just kind of curious Matt on the outlook on the enterprise side it was up.
And I'm just curious of your conversation as you look at the next year, whether we could see a bit better cycle on the enterprise side.
Yes sure of Blayne, Yeah, I think the couple of things I mean, certainly there has been a lot of of.
Of concern about the enterprise market in general.
I think we have started to see some positive more positive commentary out of some of the large Oems. So I think thats, good but really for US you know, it's sort of the continued story of our own new product introductions and and share gain and so you know we recently.
Announced and in addition to our Borderless enterprise portfolio of with our October October multi gig buys.
We had strong design wins on on five and the most recent quarter, our new switches have got great traction as well and you know even in our and our traditional enterprise.
Nick and fibre channel business. We're also seeing strong design activity. So I think all of that bodes bodes well for us and it's certainly even in the short term, helping offset what what many of my considered to be a more challenging over.
Overall enterprise environment.
We actually see we see positive trends into Q4, and we anticipate that's going to continue next.
The next year and then as we even highlighted at the analyst day with some new more strategic wins.
One example would be at our and our and our OCTEON processor area.
Theres, even theres even growth beyond that so I think we're we're we're very excited about the enterprise business as a key part of our portfolio.
To drive growth and also be overall accretive to the to the gross margins of the company. So it's a good business for US we're investing there and we're very focused on.
On product leadership and that area.
Thanks.
Thank you. Our next question will come from John Pitzer with Credit Suisse. Please go ahead.
Yes. Good afternoon. Thanks, Let me ask the question Matthew clearly of the strength of the story here are all of the bottoms up product cycles and you mentioned.
A new win and your pre and what I'd love to get a little bit more color of the five nanometer OCTEON win against Tech City six to help US understand why you think you on that socket when it starts to ramp and.
Kind of what the revenue potential there is and you know given all of the product ramps you have those ramp still live in the real world and we're still kind of in the.
Macro environment, that's kind of just the crawling along I'm kind of curious as we get the calendar year 21, if we do see that sort of cyclical recovery in the macro how much of an accelerant to growth. The some of these products like how do you think that could be.
Sure.
Yes, so so I look I think.
You know if you go back and and you look at.
And let's even go back all the way of Q2, the Cavium days you know theres been this ongoing the first it was Mips and then transition to arm.
A battle in the networking processor area and Cavium and that Marvell has had a strong position there great.
Great products, but but but not the share leader and even in the sort of embedded world.
Xeighty six has always been very strong we you.
We're very encouraged.
By where we sit from a product positioning as we look at our next generation or kind of generation OCTEON platform, that's going to be coming out in five nanometer and I think the there. It's I think it's well understood you know beyond well understood some of the challenges, but the largest player in that market has in turn.
Sales of there.
Their process roadmap. So I think we line up very well from that point of view, certainly and but on top of that we have we of leadership and architecture for for these types of applications for data plan processing and.
And very deep relationships with our customers and so the win that we highlighted I talked about today, but we had actually talked about it at Investor day, as well was for one of the leading Oems and not only the United States, but the world who typically makes these types of platform decisions much earlier than others in terms of how.
They plan. So we are I would say this is sort of a.
A very positive leading indicator that we got selected after a very extensive benchmark and by the way.
And and we said at the Investor Day, I think it was and rockets presentation that this.
This piece of business alone would be an incremental 100 million dollar a year type of annual.
Socket for US, which is which is huge for a company like ours, we don't have that many.
Many sockets of that nature, but I think that thats, a very strong leading indicator John the in this next cycle with five nanometer ramping and again this is going to take the.
Kind of manifest itself over the next several years.
We think we're in a very strong position there so I think that.
And I think theres, the chance OCTEON could could could have.
A much stronger place and the market than it has historically and then you're right on the even in this environment.
At least many of the chip companies are performing well, we think we are and certainly if we get the economy on a macro level moving in the right direction next year.
That's really not on our assumptions for the I mean, we sort of assume that you know at least as we plan, we're planning that theres still going to be some turbulence, but certainly if the macro improves and there's there's there's strength and enterprise spending as an example of businesses are spending again before going back to work et cetera than I do.
And it's going to be a lift for for companies like us, but I think it's a little bit early to tell given all the.
All the all the transitions happening on the world today.
Thanks, and congratulations yeah. Thanks, John.
Thank you. Our next question will come from Ross Seymore with Deutsche Bank. Please go ahead.
The amount I wanted to dive a little bit into the networking guidance for the quarter and then some longer term implications for the it sounds like pretty much everything is going to be up sequentially, except for two way six sides a stick on the the wireless infrastructure as well as the cloud eighth excited so are those ace of pauses or those things that are due to the end market weakening and just taking a pause.
And as a the B I know its net end of life, but of we already hit kind of a plateau and those businesses and then the other side, where everything else is up how much of that do you think is macro getting better sort of a systematic increase versus marvell specific product cycles driving that sequential growth.
Sure Yeah. Thanks, Ross so on the first part of it I actually think it's very consistent with the question you've asked me and the past I think on.
You you during one of our.
One of the Investor Road shows you hosted where I did a call with with the broad set of investors. You said, Hey, you know with some of these markets you're getting into like carrier or like cloud.
How do you expect the volatility of those markets to be and those lend themselves to be somewhat lumpier and.
And so so that is the case I mean, you you didn't nail that and that in the case of the cloud side.
On the had nothing to do with demand, but the pattern in which new products ramp and you've probably seen this with other semiconductor vendors it isn't exactly a linear process they tend to buy.
The larger quantity early than there might be a quarter of sort of digestion and then.
The they come back against the this is actually of the strength. We saw on Q3 was the beginning.
Of a ramp on this program and it just they took the it took a large quantity and Q3.
Some deployments or they're going to.
Do and their own Datacenters through Q4, but certainly we expect that that overall program to be up quite a bit and next year, because that's a brand new program and that's just ramping and then on the Fiveg side.
China has been the the most aggressive in terms of Fiveg rollouts globally.
And we've seen that strength actually in China for the last two or three quarters, including Q3 being the strong quarter and I think it's pretty natural of.
For them to do some absorption as well and that commentaries I think been out there somewhat broadly we certainly think again overall next year.
Trying to Fiveg deployments should continue there's still a whole bunch to go and.
And we'll benefit when that happens so yeah I think on those cases Ross, it's really more of just new products ramping you know in the case of cloud and on the case of Fiveg. It's just I think of normal fluctuation and how the the carrier demand.
Line, then and then I'd say for our Q4, you're right pretty much across the board all of our product lines are up and I would say, it's mostly products driven for us I mean lets take automotive as an example, we indicated it was crossing over and a double digit millions.
Of seeing car production pickup we had noted we were in a whole bunch of model of your 21 vehicles, that's all now booking and.
And that's again, a very unique marvell products cycle in terms of automotive Ethernet that continues not only through through our fiscal 22, but but but certainly be on that as these programs go into high volume. So I would I would attribute this to be more our own product cycles, but certainly I think.
If you just talk to other of.
Other people and the chip industry right now the of the sentiment is quite bullish in terms of.
Other Ceos and other companies feeling like that it is and overall stronger demand environment out there, but I think we're guiding up.
Maybe a little bit more than others, just because we.
We do have some unique products cycles that were a part of.
Yes.
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Thank you. Our next question will come from toy seven bird with stifle. Please go ahead.
Yes, Thank you and congratulations on the results of and Matt. Thank you for the sort of preview on already yearend of and I was hoping you could elaborate a little bit more of the company's positioning there maybe not as much on the technology side, but kind of on and the business model and how that supply chain works my understanding it's it's going to be more of the white box market.
So.
And the any color you could share with us there on the positioning with the great.
Sure, Yes will continue a little bit of my many preview, but but I think Tory you should expect relatively soon we will be doing a.
A pretty comprehensive release on overran.
And the Ram by the way in terms of how we're going to play out we fit in the market and there will be a combination of of technology and also the segmentation, but you know I.
I think that the keep it at a higher level. It is and it is an interesting potential disruption.
That's out there and it's certainly gained gained momentum.
In terms of the conversations we're having over the last six to nine months I.
I do think there will be there will be you know.
I think it will get deployed and some in some areas and I view, it and a couple of ways one I think.
I think there are smaller emerging players who would be more in the white box model and there. We you should assume we're going to have more of a standard offering that leverages all of the IP that weve already developed and is a fairly efficient way to get.
Merchant products out into the market and Thats available. The days you know we're shipping macro class.
Fiveg baseband processors today, so I think were and the best position of any company quickly to go do that at the same time the large incumbent players in Rand are not asleep at the wheel and I think each of them will have their own.
Go to market strategy around Doran and be ran and and the most customers were also.
A key provider to them already for the macro and so I think we have an ability to support.
The traditional players who probably have.
The to grapple with some level of innovators dilemma on this market in terms of how they go about it and how they play and and how they manage it and then there's of Theres a set of upstarts that we can also address.
So the more on that later, but I think it won't be just white box and sort of startup companies I think it will be a combination of the two and.
And I think it'll it'll take some time to play out story I don't think this is the in overnight sensation and probably will go.
The sort of map the hype cycle curve on it liquidity and with a lot of other emerging technology, the ramp probably looks a lot like that and so you can pick your place on the on on the hype cycle, it's probably on the way up and there will be a point, where it's probably got a pause and then at some point it'll it'll make and impact, but we certainly plan to be there, but in a way that that enables the.
Broader market and Leverages all the development, we've already done I think thats. The key part is doing this and and R&D efficient way.
Which of enables us to participate in it.
Very helpful. Thank you.
Thank you and our next question will come from Harlan sur with JP Morgan. Please go ahead.
Good afternoon, and thanks for taking my question it looks like the Thats the optimized our near line issued the shipments are looking are starting to pick up this quarter ahead of what looks to be a re acceleration in cloud spending starting kind of first half of next year and.
Thank you to lead HDD customers are well into the ramp of 16 terabyte.
But there are also starting to qualify 18 as well and.
As we progressed through next year it sort of looks like 18 is going to be the sweet spot from volume. So that's more of those dollar content opportunity on 18 versus 16 with true to lead customers and is the team starting to get visibility on continued strength in your new line business over the next several quarters.
Sure I think Harlan I think the corollary.
You know around cloud demand and cloud strength, certainly ripples back and the in the near line. So.
So so we do see that in the short term.
As you probably know the big the big move for US is really the ability to get.
To get pretty amplifiers and as the in terms of the content and so we have certainly one on one account that were shipping with today along with controllers. So the.
Beyond that you know the the content from a controller and even plus power.
Free amplifier standpoint doesn't change all that much from the generations of.
I think the big mover for us if we can get.
More and more preempt engagements and the in the near line side. We certainly have one that's already publicly announced and we're working on more but.
I think ASP is content you know as you get to these high capacity drives is going to be fairly similar from generation to generation and that goes for 18. It goes for 20 of goes for <unk> and beyond.
Unfortunately, and that's that's always the challenge is there's just tremendous exabyte growth and tremendous.
Data storage growth happening in of the controllers. Unfortunately don't get the same type of ASP uplift to them, although we've managed to get a little bit more value.
Generation to generation, but its very incremental relative to the to the to the bank for the Buck the the cloud customers get by going from a 16 to and 18 or and 18 to 20, we don't see that and our SBS, but it's good it's good business and and we certainly had a lot of value there.
The thinks that.
Thank you. Our next question will come from Christopher Rolland with Susquehanna. Please go ahead.
Thanks for the question guys.
I also thought the top of rack switch announcement of the Hyperscale or was interesting as well.
You previously focused on the enterprise market.
Other than the market, where we're really talking about speeds and feeds but it looks like.
There could be a more of a shift there and I was wondering if that is the case and.
Perhaps you can describe your capabilities. There is this all coming out of Israel and right now and.
And what else would you have to do to try to catch up with the the incumbent here.
Yes, so let me be really clear Chris.
You know for the for the Marvell designed the business that has been hit.
Classically focused on.
Enterprise switching campus switching sohot core and aggregation switching and that's been our sweet spot Thats, where weve been growing when.
When you go to the speeds and feeds and cloud side. We don't we don't have a development internally on that so the the reference I think that you're pointing to is an ace sick.
When the that we have and we actually have we have a number of these that we're working on.
From the of era business, Okay, and now it's marvell business because in some cases, we've won the since we since we joined forces. So the way that we think about accessing that kind of high and.
Top of rack switch market actually we think we're probably better served at this point.
Supplying.
Customer basics, the people, who want to compete and that market.
You know and I would say that for for the for global usage, whether it's at the at the.
Across the Super seven.
And that also gives us a nice strategic entre as well as we think about when we joined forces with within by and the roadmap really looking more and more to go to co package optics.
The ability to be I would call more open source, there and really support the ecosystem and support the.
The the broader set of companies that are doing these that aren't the market leader I think is good for us I think it and they get the rate we sort of think the returns to do that are probably better than if we just tried to go head to head.
Which we've we've we've said for many years is just not our strategy.
I do think the the large.
Competitor, there who is the market leader you know they just announced the new product I think thats actually good because it's showing from a from an opex standpoint, the that that's going to continue to drive the need for optics and thats going to be a tailwind ultimately for people like inphi. So we have to think of through Chris in terms of how we go in there, but today just to be very clear of the the win that we announced was.
It was a was the custom ASIC.
With another company, who were doing a high and switch for.
Thanks for all of that kind of stuff yes.
And today's final question will come from share any perjury with SMBC Nikko Securities. Please go ahead.
Thank you Hi, Matt I have a follow up to one of the previous questions. Matt If I look at your network and guard and.
The Samsung will be of Nokia will be up and fiveg, but the ace of businesses down. So if you could please.
Clarify if the Fiveg and total is growing or declining or flattish and then as we as we kind of head into the next year first half of next year. If you could qualitatively talk about what's your thinking on how are you looking at Samsung and Nokia continuing ramps in the first half and on so that's sort of the age.
Nick is concerned is.
Is the of rebound the recovery niceties, it pretty much a function of China coming back or do you see any other regions helped.
Helping the market to recover thank you.
Sure, yes, so so I think it.
The kind of starting with the high level first.
The the nice thing about our portfolio Srini as we have both of these a sick.
No opportunities that are of now materialized, mostly driving China and and we have our other two lead customers for the Marvell stuff and the is a great example of where you know we had a lot of strength early on through the China ramp on our basic business Thats somewhat moderated and now the good news is.
We see.
We see Samsung and.
Samsung showing a lot of strength, which is which is great. We invested a lot there and I think you know, it's very encouraging to see to see that that really start to go and then we've got the.
Net new wins that Nokia that are I think well understood and so so thats just starting if you look at Q4, it'll it'll be arse.
We're guiding it to be our six straight sequential.
Quarter over quarter of growth quarter for Fiveg.
So while in aggregate so in aggregate, it's going to continue to grow and it has been growing and I think others. In this communications market have seen a little bit more volatility during different parts of the last call. It four to six quarters because in general the other players are more established they were bigger and force.
Org and so our play is really where emerging we're gaining share and fiveg, we have new programs ramping we of new customers ramping and we've got this nice mix now and diversity such that even if one region or geography.
Has the digestion quarter, we've got the others the others kicking in and certainly we and we anticipate that next year, we'll see we'll see growth across the board, we think China should resume and we see our lead customer continuing to ramp, especially as the U.S. starts to deploy.
I think there is going to be a lot of it need to go do that especially with the fiveg iPhone selling as well as they appear to be and also if you. If you look at Qualcomm's forecast next year of of 500 million Fiveg enabled phones, I think thats going to drive a lot of demand for networks and between the design win positions, we have with the leading players who will supply.
The leading early geographies, we think we're in very good shape for for our fiscal 22 next year.
Got it thanks, Matt.
No problem.
Ladies and gentlemen, thank you for participating in today's question and answer session I would now like to turn the call back over the management for any closing remarks.
[noise]. Thanks.
Thanks, guys of of look forward to talking to all of you again next quarter.
Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect and have a wonderful day.
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Yeah.
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