Marvell forecasts revenue below estimates on Huawei ban; shares slide

Marvell Technology Group forecast third-quarter revenue below Wall Street estimates on Thursday, as a ban on selling components to Chinese telecommunications giant Huawei Technologies, hurt the US chip-maker.

Shares of the company fell 6.2 per cent to $22.71 in after-hours trading.

“We remain in a very challenging macroeconomic environment, which has certainly worsened recently and has impacted our guidance for the third quarter,” Chief Executive Officer Matthew Murphy said on a conference call with analysts.

“There’s clearly a pause and the slowdown going on is driven by a lot of effects.”

Murphy highlighted challenges to business from Huawei and certain large customers, noting that the switch to 5G cellular communications from 4G had cut demand for chips.

Marvell said it stopped shipments to Huawei, one of its key customers, in the first quarter, following the US ban on the phone maker. The US government blacklisted Huawei in May, alleging the Chinese company was involved in activities contrary to US national security or foreign policy interests.

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Kinngai Chan, an analyst with Summit Insights Group, noted that weaker demand from Cisco Systems also hurt business.

“Cisco in some quarters contributes up to 11% of Marvell’s total sales. ... Huawei is only about a 5 per cent to 6 per cent customer,” he said.

Cisco itself has been facing challenges and said this month that sales in China fell 25% in its latest quarter.

Marvell expects current-quarter revenue of $660 million, plus or minus 3 per cent, below analysts’ estimates of $697.58 million, according to IBES data from Refinitiv.

The company also reported second-quarter revenue and profit above analysts’ estimates, helped by strong sales in its networking business that sells Ethernet and Wi-Fi products.

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Revenue in the quarter ended August 3 fell 1.3 per cent to $656.6 million, but above estimates of $652.1 million.

The company reported a net loss of $57.3 million, or $0.09 per share, compared with a profit of $6.8 million, or $0.01 per share, a year earlier.

Excluding items, the company reported a profit of $0.16 a share, 1 cent above the average analyst estimate.