Marvell Technology (MRVL) Stock Hammered after News of Accounting Probe

Shares of Marvell Technology Group Ltd. (MRVL) were trading down -1.55 or -14.69 percent to $9.00 per share in Friday’s premarket after the company revealed in a regulatory filing that it was conducting an internal investigation into its accounting and other matters. Marvell Technology stock closed at $10.55 per share, up +0.01 or +0.09 percent in Thursday’s regular trading session.

Founded in 1995, Santa Clara California based Marvell Technology Group Ltd. is a major producer of storage and communications semiconductors and integrated circuits.
The company is a “fabless” semiconductor company, which means that after designing its semiconductor chips, it outsources the fabrication of the chips to a manufacturer called a semiconductor foundry. Marvell produces semiconductors for digital entertainment, wireless and mobile communications, high volume storage and networking. The company operates design centers in the Eurozone, Canada, China, India, Israel and Singapore.

In a Form 12b-25 filing with the Securities and Exchange Commission, Marvell disclosed that its Audit Committee would be conducting an internal investigation on the recognition of certain revenue issues which took place in the company’s second fiscal quarter for 2016. The company issued a press release outlining its preliminary second quarter results.

The investigation’s focus is over seven to eight percent of revenue recognized in the company’s fiscal second quarter that would have been received and earned in the company’s third quarter. The revenue is now no longer available to be received in the current quarter. This is significant in that the high percentage of lost revenue could be indicative of weaker demand for certain Marvell products, especially in the storage end market.

According to the company’s press release, the slowdown in demand for certain storage end market products were the result of a weaker global economy and slower PC sales. The result was weaker than expected demand for HDD products resulting in an overall market decline in the products.

The Audit Committee is also going over certain aspects of the company’s internal control over financial reporting, and whether senior management’s operating techniques resulted in an open flow of information and communication, which would lead to appropriate conditions for effective control environment.

So far, the Audit Committee has not uncovered any material issues and Marvell says that it believes the investigation will have no material impact on previously filed financial statements. The SEC filing said that Marvell will be unable to file its quarterly report Form 10-Q for its latest quarter ended on August 1st, 2015 because of the ongoing investigation.

The company’s press release gave preliminary results for the quarter, showing a second quarter loss of -$382.4 million or -0.74 per share compared to a profit of $138.9 million or +$0.27 per share in the same period one year ago. The analyst consensus was for the company to report a profit of two cents per share or $14.2 million. The preliminary report on revenue was for $711 million, a decline of -26 percent from last year. Analysts expected the company to report revenue of $721.9 million.

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Published on Sep 11, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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