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Better Times for Marvell Technology?

The communications chip maker reports a jump in fourth-quarter sales and gets an upgrade from an analyst

Marvell Technology Group (MRVL) says its sales rose during recent months, as the Santa Clara company integrated the $600 million Xscale communications-chip business it had bought from its rival Intel (INTC). After the news, investors bid up Marvell stock by more than 3% to $20.46 in heavy volume on Feb. 27 -- bucking the downward spiral in the stock market that day.

Marvell's fourth-quarter revenue rose to $622 million during the three months ended Jan. 27, an increase of 27% compared to the same period last year. "During the quarter we successfully completed the integration of the applications and communications processor business we purchased from Intel," said Dr. Sehat Sutardja in a press release late Feb. 26. "As we start a new fiscal year we are excited about the positioning of our advanced product portfolio as well as our ability to deliver solid growth."

Marvell is trying to improve the efficiency of the business it bought from Intel, which includes a trio of processors for running software on cell phones and consumer-electronic devices. Marvell's effort includes steps like hiring cheaper contract manufacturers instead of making computer chips in Intel's factories - and cutting staff. Marvell had warned last year that its profits could suffer for several quarters and that the acquired business would lose money until the end of 2007 (see, 11/29/2006, "Marvell's Trio of Processors").

One analyst was upbeat. According to the Associated Press, Needham analyst N. Quinn Bolton upgraded Marvell to buy from hold, saying the company's core business has "passed its bottom" and looks to improve in the months ahead.

But another analyst was a bit more cautious. "We think potential sales increases may come at the expense of (profit) margins," said Standard & Poor's Equity Research analyst Clyde Montevirgen. S&P kept a $21 target price and hold opinion on the stock. (S&P, like, is owned by The McGraw-Hill Companies.)

Market players are left to guess at what's happening to the company's profits. Marvell does not expect to announce full financial results until it finishes grappling with an investigation into its accounting of stock options.

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