Harsh Kumar, leading semiconductor analyst with Stephens Inc., is very bullish on Marvell (NASDAQ:MRVL). In a recent interview with the Wall Street Transcript, Mr. Kumar set out his arguments for buying the stock:
TWST: Can you name a few of those companies that top your “buy” list, and tell us why you like them?
Mr. Kumar: Yes, we are very bullish on, for example, Marvell (NASDAQ:MRVL). It’s more of a cleanup play, where this company has taken several actions to clean up its cost structure, and so that cost structure has improved by leaps and bounds, resulting in basically an explosion in earnings. The earnings have effectively tripled over the last two years. And we don’t think that they’re done.
What’s happening there is that for years, almost about a decade now, around up to last year, this company was poorly run. The founders were brilliant technologists, and they were able to grow this company up to a certain level, and then it became simply too big, and it started reaching into areas that were perhaps sometimes not profitable. There was a lot of wasted R&D; they got into a very expensive piece of technology called baseband, which is the actual cellular modem, and that’s basically a big boy’s game — we are talking that’s $300 to $400 million of R&D per year.
Early last year, an activist came in and provided fiscal discipline to the company. So the company had a brand new management team all the way from the CFO through to even human resources people. They’re all brand new, legal, accounting, CFO, CEO, COO. All the team heads are all brand new.
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