What’s David Einhorn Doing with Marvell?

Aug 17, 2012
J. Webster
Comments Off on What’s David Einhorn Doing with Marvell?

David Einhorn of Green Light Capital owns 18,372,247 shares of Marvell, which are now down close to 16% after the company announced disappointing quarterly results and guidance. That’s got to hurt. And even the best Poker player will have a tough time hiding his frustration. Roughly a year ago the stock was trading for close to $22 a share, now it’s been cut in half.

In Einhorn’s letter to investors on July 23, 2012, he had this to say about Marvell:

Marvell Technology Group (MRVL) was the other significant loser, as its shares fell from $15.73 to $11.28 during the quarter. MRVL gave tepid guidance and Wall Street has modestly reduced its estimates of earnings per share from $1.25 to $1.15 this year and from $1.45 to $1.40 for next year. MRVL has about $4 per share in cash and now trades at roughly 5x next year’s earnings net of the cash on the balance sheet. Most of the cash is excess, and the company has commenced what we hope will be an aggressive share repurchase program. We have used the reduced stock price as an opportunity to increase our stake in the company.

Here’s the story of why Marvell is struggling – not good when one of your main customers happens to be Research in Motion:

The Santa Clara, Calif., company, which makes chips and parts for hard-disk drives, networking equipment and mobile devices, has now posted shrinking profits for six straight quarters. Marvell was hurt last year by weakness at major mobile customer Research In Motion Ltd. (RIMM) and disruptions in hard-drive manufacturing because of severe flooding in Thailand last year.

Recently, the company has faced softer demand from mobile and wireless customers, particularly in China. Marvell has been diversifying away from Research In Motion by setting its sights on a fast-growing segment of the Chinese 3G smartphone market. But there have been signs China may not be as strong as expected, as economic growth there slows. (Fox Business)

I wonder how Einhorn’s feeling this morning after seeing the stock get crushed…I wonder why in the world he even owns the stock. He’s also a big shareholder of Apple, you’d think he’d just buy more shares of that stock. What does he see in this company? Is it so beaten down now that’s it just cheap looking long term?

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