Please ensure Javascript is enabled for purposes of website accessibility

Marvell Technology Stock Jumps as CEO and President Resign

By Timothy Green - Apr 5, 2016 at 11:26AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Accounting issues and a steep decline in revenue have created the need for new leadership at the struggling company.

Marvell's executive team as of September 2014. Image source: Marvell.

What: Shares of Marvell Technology (MRVL 1.46%) jumped on Tuesday following the company's announcement that CEO Sehat Sutardja and President Weili Dai are resigning from their positions, effective immediately. At 10:45 a.m. ET, the stock was up about 11%.

So what: The news of the executive departures comes less than one week after Marvell announced that it would be unable to file its 10-K within the prescribed period. Previously, the company had announced that an audit committee investigation had found issues with the company's internal controls. These issues led to Marvell experiencing delays in the completion of its financial statements, according to the company's SEC filing.

In the same filing, Marvell stated that it expects its net revenue for fiscal 2016, which ended in January, to be significantly lower compared to fiscal 2015, driven by decreased demand for its storage products and the restructuring of its mobile platform business. The company also expects to post a net loss for fiscal 2016, due to a $750 million legal settlement and costs associated with the restructuring.

Given these problems, the departure of the CEO shouldn't come as a surprise. Marvell's lead outside director Arturo Krueger provided few details. "The Board would like to thank Sehat and Weili for their enormous contributions and service since they founded Marvell in 1995. Marvell has revolutionized the world through its innovative technology and breakthrough designs in the semiconductor industry. However, the Board believes that the time has come to move in a new leadership direction."

Now what: The resignation of the CEO and President is being viewed as a positive by investors, with the jump in the stock price on Tuesday more than reversing the decline due to the delayed 10-K filing. However, with Marvell vague about exactly how bad revenue will be in fiscal 2016, investors currently don't have the whole picture. The average analyst estimate currently calls for revenue of $2.77 billion, a 25% decline and the lowest level since fiscal 2007.

There's still plenty of uncertainty surrounding Marvell, and while the departure of the CEO will allow new leadership to begin to right the ship, the stock may see more volatility going forward.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marvell Technology Group Ltd. Stock Quote
Marvell Technology Group Ltd.
$54.86 (1.46%) $0.79

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.