Observations from MRVL
MRVL saw nice pickup in disk drive units especially from consumer related devices such as iPod, which continues to point to very strong AAPL quarter coming up. Gigabit ethernet transition has been concentrated at high-end and sophisticated enterprise systems for now and MRVL sees no change yet which means the installed switches from CSCO, FDRY, NT, EXTR are not yet getting ripped out to be replaced in broad fashion yet, but the trend is improving. Mass adoption of gigabit ethernet to the dektop combined with VoIP to the desktop are the two main drivers of network upgrades currently and the rate of adoption for these two technologies is very important for the health of the networking industy. MRVL acknowledged that the inventory issue still existed in the networking components but hopefully will be resolved by end of Q4.
For most part MRVL didn't paint a dire end market picture- could it be because they are at high-end in most of their markets? MRVL has always been at the cutting edge of technology and innovation which has led it to gain market share in almost all markets MRVL participates in and for it has enjoyed a premium valuation. The revenue growth has been driven by past investment in R&D, making current investment very important for future. This could hinder maintaining the high operating margins. Premium valuation depends on both high growth and operating margin, and general view is that one has to give sooner or later especially as company moves more into consumer market. But their focus on high-end highly integrated solutions has allowed MRVL to keep delivering on both uptil now and hopefully in the future as well.