Marvell Technology (MRVL) Announces Restructuring Plans; Includes Divestitures
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Marvell Technology Group Ltd. (NASDAQ: MRVL) announced restructuring actions intended to refocus its research and development (R&D), increase operational efficiency and improve profitability. These actions are expected to be fully implemented by the end of October 2017 to lower annual operating expenses from a current annualized run rate of $1.08 billion to the $820-840 million range.
Matt Murphy, Marvell's President and Chief Executive Officer, explained, "The single biggest factor limiting the potential of the Cloud and utilization of billions of connected devices is the bandwidth of today's technology. By focusing on our strengths in storing, moving, and accessing data at high speeds, Marvell is well-positioned to enable the technology of tomorrow."
Marvell is pursuing two initiatives to achieve this focus:
- Discontinuing specific R&D programs, streamlining engineering processes, and consolidating R&D sites for greater efficiency, which will eliminate approximately 900 positions worldwide. The Company also expects a significant reduction in legal and accounting costs. Altogether, these changes are expected to lower annual operating expenses by $180-200 million.
- In addition, the Company plans to divest non-strategic businesses with approximately $60 million in operating expenses and $100 million in revenue, based on a first half of fiscal 2017 annualized run rate.
As a result of these actions, the Company expects to incur charges of $90-110 million over the next four quarters, including cash charges of $35-50 million. Restructuring and restructuring-related charges include an estimate of severance, asset impairment, lease termination fees, and other costs.
"These are difficult but necessary changes," Murphy said. "I'm confident these actions will yield a greater return on our R&D investments, deliver the innovation our customers need, and generate the value our shareholders expect."
Marvell does not plan to hold a conference call with investors and analysts in association with this press release. The Company will discuss the restructuring and cost reduction plan in more detail during its next quarterly earnings conference call, which is scheduled following the release of its third quarter of fiscal 2017 results on Thursday, November 17, 2016 at 1:45 p.m. Pacific Time.
Conference Call on Thursday, November 17, 2016
Marvell will conduct a conference call on Thursday, November 17, 2016 at 1:45 p.m. Pacific Time to discuss results for the third quarter of fiscal year 2017. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 11983150. The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until December 17, 2016.
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