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Understanding Marvell’s Growth Strategy in the Networking Space

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Marvell’s networking segment

After Storage, Networking is Marvell Technology Group’s (MRVL) largest segment, accounting for 23% of the company’s revenue in fiscal 3Q17. This is the only segment that has reported consistent sequential growth over the last four quarters, and we’ve seen this result because the company has repositioned its networking products in the core enterprise, data center, and cloud markets.

The company’s Networking product portfolio is now made up of ethernet solutions, embedded communication processors, and network processors.

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Networking segment’s earnings highlights

In fiscal 3Q17, the Networking segment’s revenue rose 20% YoY (year-over-year) to $153 million, driven by strong demand in the campus and enterprise markets. However, on a sequential basis, segment revenues fell 6% during the quarter due to a slowdown in carrier spending.

During the same quarter, Cisco (CSCO) reported 2% sequential growth in revenue from ethernet switches, whereas Broadcom (AVGO) reported flat sequential growth from wired infrastructure.

In fiscal 4Q17, Marvell expects Networking revenues to remain sequentially flat at $153 million, representing a YoY growth of 12.9%. But the company expects networking revenue to grow in the long term.

Marvell’s strategy for networking

Marvell has already focused its Networking segment on enterprise, data center, and cloud markets and will continue to target these markets in the future. But Marvell’s new chief executive, Mathew Murphy, stated that the company has the right technology in the networking space but has some “low hanging fruits” in its distribution channel. It will thus focus on leveraging its distribution on some key partners and generate incremental sales from existing technology.

The company will also refresh its existing portfolio and make available some of its leading products in the market. These products include its 1 gigabit, 2.5 gigabit, 5 gigabit, 10 gigabit ethernet switches, and other ARM based SoCs (system on chips).

Networking market outlook

Grand View Research expects ethernet switch sales to grow at a CAGR (compound annual growth rate) of 4.5% to reach over $23.5 billion between 2016 and 2024. Sales are likely to be driven by growing demand for high speed and better performance data. Marvell is playing all its cards to tap this market.

Continue to the next part for a look at Marvell’s key market of wireless.

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