Here's the thing with gutsy bets: You win big, or you lose big.
Marvell Technology
As the chip designer geared up for Thursday's third-quarter report, I told you to pay attention to the company's Chinese sales, specifically, in the TD-SCDMA market. That's the smartphone data standard of choice for leading Chinese network China Mobile
The company reported adjusted earnings of $0.24 per share on $816 million in revenue. Those numbers missed Wall Street's estimates by 8% on the bottom line, and 6% in terms of sales.
CEO Sehat Sutardja chiefly blamed the global economy, like everyone else is doing these days. Marvell is also a major parts supplier to Research In Motion, which teeters on the edge of extinction, and isn't helping Marvell's sales at all. RIM's fortunes are flagging so fast, and Marvell has so few customers for its Armada-branded mobile processor line, that this chip line's future may be brighter in newfangled server systems instead.
After those overarching problems, wouldn't you know it -- Sutardja points right at slow demand from Chinese smartphone customers. "Revenue from TD smartphone customers in China declined due to slower than expected demand and increased competition," Sutardja explained. He expects TD orders to stay low for another quarter or two.
The toughest TD-SCDMA competition right now comes from local specialist Spreadtrum Communications
The Chinese smartphone market is still the key to Marvell's future. Unfortunately, somebody seems to have changed the lock. As a result, the stock is sniffing around three-year lows today. I'll give Marvell two more quarters to show signs of life in China before giving up on my bullish CAPScall. It's all about execution at this point.
How important is China to chip giant Intel? Find out in our brand-new premium report on the industry leader. Inside, we discuss one of the biggest risks facing the chip giant, one that it needs to find an answer for soon. We also provide a full year of updates when key news breaks, so make sure to claim your copy by clicking here now.