Can This Tech Value Play Turn It Around?

In the following video, Motley Fool senior technology analyst Eric Bleeker looks at Marvell's recent earnings strikeout. On Thursday, Marvell reported earnings that significantly dissapointed investors, with earnings guidance for next quarter a whopping 23% below Street estimates.

However, as Eric notes, there's a lot to love about Marvell as a stock right now. The company's CEO has been lauded as a visionary, Marvell has $2.1 billion in cash against a market cap of $6 billion, it pays a dividend of 2%, and it trades at only about nine times free cash flow, a multiple that falls to six when backing out cash. Not only that, but the company is also aggressively buying back shares, and hedge fund legend David Einhorn has loaded up on it. 

Yet Eric warns investors that Marvell's reliance on Research In Motion as a mobile customer and its levered nature to the PC industry -- thanks to its dominance of hard disk controllers -- are two trends that should continue working against the company. Not only that, but Eric thinks Marvell's past success in China's wireless space is being compromised by further aggression from Qualcomm, and pressures in that region should only grow. 

Eric suggests paying a higher multiple for a leader like Qualcomm as the right move between the two companies, in spite of some appealing facets from Marvell. To see his full thoughts, watch the following video. 

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Eric Bleeker has no positions in the stocks mentioned above. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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