Marvell Technology Group reported preliminary financial results for the third quarter of fiscal 2016, ended October 31, 2015.
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Revenues for the third quarter of fiscal 2016 were $674 million, down approximately 5 percent from $711 million in the second quarter of fiscal 2016, ended August 1, 2015, and down approximately 28 percent from $930 million in the third quarter of fiscal 2015, ended November 1, 2014.
Storage revenue declined 16% sequentially reflecting lower demand from HDD customers but was offset slightly by better-than-expected SSD controller sales.
Networking revenue in the third quarter of fiscal 2016 declined 8% sequentially reflecting continued weak demand for enterprise networking products while mobile and wireless revenue grew 15% sequentially on stronger smartphone demand, particularly in the low-end.
The company anticipates mobile handset platform-related revenue to decline through fiscal year 2017 due to the restructuring actions announced on September 24, 2015.
The company is in the process of assessing which transactions should be considered as "pull-in" transactions for which revenue is properly recognized in a quarter but would have been expected to be received and earned in the subsequent quarter.
This process includes continued assessment of the amount of revenue recognized in the second quarter of fiscal 2016 derived from pull-in transactions, which is subject to the Audit Committee's investigation.
Although the company believes revenue attributable to "pull-ins" was properly recognized in the second and third quarters of fiscal 2016, the amount of "pull-ins" has had an impact on the revenue attributable to each such quarter.
The U.S. GAAP net loss for the third quarter of fiscal 2016 was ($62) million, or ($0.12) loss per share compared with a GAAP net loss of ($403) million, or ($0.78) loss per share, for the second quarter of fiscal 2016, and GAAP net income of $115 million, or $0.22 per share (diluted), for the third quarter of fiscal 2015.
Non-GAAP net income for the third quarter of fiscal 2016 was $28 million, or $0.05 per share (diluted), which included adjustments of approximately $90 million including: $46 million for restructuring related to the mobile handset platform business, $31 million for share-based compensation, $6 million for litigation reserves and approximately $6 million for other items.
By comparison, non-GAAP net income for the second quarter of fiscal 2016 was $62 million, or $0.12 per share (diluted), which included adjustments of approximately $465 million including; $395 million for litigation reserves, $37 million for share-based compensation, $27 million in restructuring expense which includes a $14 million write-down of inventory related to the mobile handset platform business, and approximately $7 million for other items.
Non-GAAP net income for the third quarter of fiscal 2015 was $155 million, or $0.29 per share (diluted), which included adjustments of approximately $40 million including; $34 million for share-based compensation and approximately $6 million for other items.
GAAP gross margin percentage for the third quarter of fiscal 2016 was 43.3 percent, compared to (7.3%) for the second quarter of fiscal 2016 and 51.1 percent for the third quarter of fiscal 2015.
Gross margin percentage was impacted in the third and second quarters of fiscal 2016 by restructuring and other related charges of $10 million and $14 million, respectively, an additional $6 million in litigation reserves for the third quarter and $383 million in litigation reserves in the second quarter.
xcluding the impact of these and other items, the non-GAAP gross margin percentage for the third quarter of fiscal 2016 was 46.1 percent, compared to 48.9 percent for the second quarter of fiscal 2016 and 51 percent for the third quarter of fiscal 2015.
Operating expenses on a GAAP basis for the third quarter of fiscal 2016 were $354 million, or 3% lower compared with $366 million in the second quarter of fiscal year 2016, and 1% lower compared to $360 million in the third quarter of fiscal 2015.
Excluding the impact of the restructuring charges of $35 million and $13 million in the third and second quarter of fiscal year 2016, respectively, $12 million of additional litigation reserves in the second quarter as well as other items which are included in operating expenses, non-GAAP operating expenses were $283 million in the third quarter compared to $300 million in the second quarter, a 6% decline and $319 million in the third quarter of fiscal 2015, an 11% decline.
Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2016 were 505 million shares, compared with 516 million shares in the second quarter of fiscal 2016 and 520 million shares in the third quarter of fiscal 2015.
Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2016 were 519 million shares, compared with 533 million shares for the second quarter of fiscal 2016 and 533 million shares for the third quarter of fiscal 2015.
Cash flow from operations for the third quarter of fiscal 2016 were $67 million, compared to $27 million in the second quarter of fiscal 2016 and $181 million reported in the third quarter of fiscal 2015.
Free cash flow for the third quarter of fiscal 2016 was $54 million, compared to the $3 million in the second quarter of fiscal 2016 and the $154 million reported in the third quarter of fiscal 2015.
Under the company's authorized share repurchase program, Marvell repurchased approximately 18 million shares for a total of $239 million in the third and second quarters of fiscal 2016.
The remaining authorized amount for share repurchases at the end of the third quarter of fiscal 2016 was approximately $183 million.
Marvell paid a quarterly dividend of $0.06 per share on October 22, 2015 to all shareholders of record as of October 8, 2015. On December 1, 2015, Marvell's Board of Directors declared a quarterly dividend of $0.06 per share to all shareholders of record on December 16, 2015. ■