Marvell Still Relies Too Much on Blackberry (MRVL, RIMM, WDC, AAPL, GOOG, MMI, MSFT)

Any good news is rewarded on a day when equities fall nearly 4%. One of yesterday’s bright spots was Marvell Technology Group Ltd. (NASDAQ: MRVL), which reported second quarter 2012 adjusted EPS of $0.38 on revenue of $898 million. Analysts were expecting EPS of $0.37 on revenue of $889. Not a big beat, but a beat nonetheless. The question should be how long Marvell can keep it up.

The company generated 14% of sales in its 2011 fiscal year from Research in Motion Ltd. (NASDAQ: RIMM), and another 21% from disk-drive maker Western Digital Corp. (NYSE: WDC). It’s no secret that RIM’s Blackberry is losing market share rapidly to the iPhone from Apple Inc. (NASDAQ: AAPL) and smartphones using the Android operating system from Google Inc. (NYSE: GOOG). Google’s recently announced acquisition of the handset business of Motorola Mobility Holdings Inc. (NYSE: MMI) probably won’t figure in much to Marvell’s future sales and earnings, but it’s too early to tell.

The disk drive business has also been soft, as shipments are forecast to fall. S&P downgraded four storage companies yesterday, including Western Digital, which was rated ‘Sell’ from ‘Hold’. Weak sales to enterprise customers and weak PC sales were cited as the reasons for the downgrade.

Research in Motion, with a market cap now of about $13.5 billion, has failed to keep up with other smartphone makers and is currently considered to be a possible takeover target at a price north of $20 billion. There aren’t going to be a lot of bidders at that price, but both Samsung and Microsoft Corp. (NASDAQ: MSFT) are mentioned.

It’s hard to see how a takeover of RIM helps Marvell much though. With its declining market share, RIM’s value could lie mostly in its patent portfolio. Yes, it’s tiresome to read more about patents, but why would a Samsung or Microsoft want to acquire RIM otherwise. Both have committed to another software or hardware platform and adding Blackberry to the mix would just confuse things.

Marvel’s shares are getting a solid boost from its earnings report, though, up more than 6.5% in pre-market trading this morning, at $12.75, in a 52-week range of $11.53-$22.01.

Paul Ausick