Sukhi Nagesh - VP, Finance & IR Sehat Sutardja - Chairman & CEO Weili Dai - President Mike Rashkin - CFO

Craig Ellis - B. Riley Harlan Sur - JP Morgan Doug Freedman - RBC Quinn Bolton - Needham Hans Mosesmann - Raymond James Sanjay Chaurasia - Nomura Ian Ing - MKM Partners John Pitzer - Credit Suisse Daniel Amir - Ladenburg Joe Moore - Morgan Stanley Kevin Cassidy - Stifel

Good day, ladies and gentlemen and welcome to the Q4 2015 Marvell Technology Group Ltd. Earnings Conference Call. My name is Whitley, and I will be your operator for today. At this time all participants are in listen only mode. Later we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this call is being recorded for replay purposes. I will now turn the conference over to your host for today, Mr. Sukhi Nagesh, Vice President of Finance and Investor Relations. Please proceed.

Thank you, Whitley, and good afternoon everyone. Welcome to Marvell Technology Group's fourth quarter and fiscal year 2015 earnings call. With me on the call today are Sehat Sutardja, Marvell's Chairman and CEO; Weili Dai, Marvell's President; and Mike Rashkin, Marvell's CFO. We will all be available during the Q&A portion of the call today. If you have not obtained a copy of our current press release, it can be found at our company website under the Investor Relations section at marvell.com. We have also posted a slide deck summarizing our fourth quarter and fiscal year 2015 results in the IR section of our website for investors. Additionally, this call is being recorded and will be available for replay from our website. Please be reminded that today's discussion will include forward-looking statements that involve risks and uncertainties that could cause our results to differ materially from management's current expectations. The risks and uncertainties include our expectations about our overall business, our R&D investments, product and market strategy, statements about design wins and market acceptance of our products, statements about general trends in the end markets we serve, including future growth opportunities, statements about market share, and statements regarding our financial outlook for the first quarter of fiscal 2016. To fully understand the risks and uncertainties that may cause results to differ from our expectations and outlook, please refer to today's earning press release, our quarterly report on Form 10-Q, and subsequent SEC filings for a detailed description of our business and associated risks. Please be reminded that all of our statements are made as of today and Marvell undertakes no obligation to revise or update publicly any forward-looking statements. During our call today, we will make reference to certain non-GAAP financial measures, which exclude the effect of stock-based compensation, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, litigation settlement, and certain one-time expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to our core operating performance. Pursuant to Regulation G, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our second quarter earnings press release, which has been furnished to the SEC on Form 8-K, and is available on our website in the Investor Relations section. With that, I would now like to turn the call over to Sehat.

Thanks, Sukhi, and good afternoon everyone. Today, we reported financial results for the fourth quarter and full-year fiscal 2015. Our revenues in fiscal 2015 increased 9% over fiscal 2014 to over $3.7 billion, a record high for the company. This 9% increase was better than many of our peers, who reported growth in the low-to-mid-single-digit range. This is the second year in a row that we were able to outgrow our peers. For the year, our storage business increased 4%, our mobile and wireless revenue grew 28%, and our networking business was up 1%. For the full-year, we grew our non-GAAP earnings per share faster than the revenue to $1.15, which represents a 13% increase from the prior year. In addition, in fiscal 2015, our operational execution improved across the board, resulting in strong free cash flow growth of over 80% compared to the prior year. Our revenue for the fourth quarter was $857 million, a sequential decline of 8% and below our guidance range. But our non-GAAP gross margin of 82% was better than expected, and we effectively control our operating expenses, resulting in 15% operating margin, and a GAAP EPS of $0.25 which was a penny higher than our guidance. The lower revenue in Q4 was due to seasonality and a more aggressive pricing environment for our mobile solution. LTE volumes however continued to ramp during the quarter and we expect this trend to continue throughout fiscal 2016. Storage revenues were in line with expectations, while networking was slightly lower. Despite the weaker revenue, we continued to focus on tight operational management and delivered margins and earnings that were better than expectations. We also bought back $20 million worth of stock or 1.4 million shares during the quarter, and paid approximately $31 million in dividend. Now I'd like to provide a brief update on each of our end markets. First, for our mobile and wireless business. LTE units grew more than 50% in the quarter despite a sequential decline in auto, mobile and wireless revenues. The sequential decline was mainly due to seasonality in gaming, lower mobile sales due to 3G smartphone decline, and lower ASP for our mobile solutions, as the competitive environment in this market has intensified. However, we are still well positioned to capture a broad spectrum of models with our latest family of 64-bit LTE SoC ranging from quad-core to octa-core solution. We are very pleased to see one of our top tier customers launching global smartphone models based on our 64-bit LTE platform, from which we expect strong growth this year. We are also making solid progress in our turnkey solution and remain on target for availability in late Q1. Additionally, our next generation LTE modem supports carrier aggregation, thus enabling us to address global operator deployment of LTE advanced. We expect this solution to grow into production later this year. Moving to wireless connectivity. We announced the industry highest performance 4x4 11ac Wave-2 products are getting enterprise access point and service provider market. We already have leading market share in enterprise and carrier grade access point and our Wave-2 technology will further expand our leadership in this space. We expect to have Wave-2 products launched by our customers later this year. In addition, we also have new high volume design wins for retail access points based on our existing Wave-1 solution. We also continued to see adoption of our industry leading MIMO 2x2 ac COMBO chips across multiple client application. For example, in the COMBO system -- echo system, we have new products from tier-1 OEMs that launched with Marvell 2x2 ac COMBO chips over the past few months and we expect to see more models launch in the coming quarter. Gaming is another area with strong MIMO adoption for Marvell, as both Sony and Microsoft continued to gain share in the console market. Other products areas where we are building a strong design pipeline for our 11 ac products include tablets, set-top boxes, and audio/video streaming products. For Q1, we expect our mobile and wireless end market to decline slightly on a sequential basis, driven by weak seasonal patterns in connectivity, but partially offset by growth in mobile. Moving next to IoT. We continue to experience strong demand for our highly integrated IoT wireless microcontroller solution. Our customers are increasingly adapting our ZigBee, Wi-Fi, and Bluetooth, microcontrollers for their IoT products. For example, we recently announced that Xiaomi has launched a line of smart home products based on our wireless microcontrollers, with more customers gearing up to launch many exciting IoT products this year, including products that will leverage our support for Apple's HomeKit. Moving next to multimedia products. We continue to see strong volume shipment into Google Chromecast. In addition, we are among the early partners for Google Cast for audio which allows users to stream audio from apps to Google Cast Ready speakers. We are also shipping our award winning ARMADA 1500 family of SoC to service providers worldwide. Last month, for example, our one of leading service providers in France launch their set-top box based on the ARMADA 1500 PRO system on a chip. Turning next to networking. We continue to gain traction with our recently introduced Questflo advanced algorithmic TCAM, which has an order of magnitude data performance to power ratio. Not surprisingly we have received very positive feedback from our customers with a number of design activities. In Q4, our networking revenues declined compared to the prior quarter, mainly due to weaker than expected carrier spending. However during the quarter we saw growth in our Ethernet switching product line, and strength in our networking system on chip products for access point from super network attached storage and gateways. In addition, we continued to receive good design win tractions of our 10G HD 10 gig copper Ethernet file. In fact, we were recently awarded a major design with a North American tier-1 OEM for our 10 gig copper files, which will enter high volume production next year. For Q1, we are expecting our networking business to grow sequentially a stronger seasonality return. Next moving on to storage. Q4 performance was consistent with our expectations in a seasonally weaker quarter and declined 4% sequentially. In HDD, our revenue grew slightly despite the sequential unit decline in the HDD industry. We believe that we are well positioned to continue to gain share and outgrow the market. Next in SSD. We continue our leadership and remain the top SSD controller vendor in the market. In fiscal 2015, our revenues grew 30% over fiscal 2014, marking a new record for our SSD business. In terms of our products, we continue to gain traction with our SATA controllers, as well as our PCI controllers. In Q4, fiscal 2015, we also introduced the world's first DRAM-less NVMe SSD controllers for Mass Market Mobile Computing products that supports the latest TLC and 3D NAND, which have been very well received by our customers, as well as many PC OEMs. We expect significant revenue from this new class of controllers starting second half of this year. As a result, we believe our SSD business remains on track for further growth. For Q1, we expect our storage end markets to decline sequentially or normal seasonality for both HDDs and SSDs. In summary, we have a strong fiscal 2015, with revenue growth that outpace many of our semiconductor peers, driven by steady growth in our core storage and networking businesses, and strong increases in mobile and wireless and SSD sales. We grew our operating income by 16%, grew our EPS by 13% for this coming year. We also plan to, on continuing our operational discipline and expect to maintain roughly flat operating expenses. Despite the short-term Q1 seasonal weakness, we continue to focus on execution in all end markets, and we believe we are well positioned to grow again in fiscal 2016. We continue to gain traction in mobile at major customers for multiple platforms. Our connectivity business is also poised to grow strongly in fiscal 2016, with increased adoption of our Wi-Fi solution in enterprise access points, service provider equipment, ultrabooks, and LTE smartphones. In IoTs we are gaining significant traction with our integrated wireless microcontroller solutions with multiple customers. Our storage business remains healthy, driven by continued growth in both HDD and SSD. Finally, our networking business remain on track to grow as we broaden our footprint across enterprise data center and service provider customers. With that, I would like now to turn the call over to Mike, to go over our fourth quarter and full-year financial results and first quarter outlook.

Thank you, Sehat, and good afternoon everyone. Moving to our financials, as Sehat mentioned, we turned in a strong performance in fiscal 2015, with steady growth from our core business and strong ramps in our newer products, which resulted in strong top-line growth that outpaced many of our peers. For fiscal 2015, we reported total revenue of $3.7 billion, an increase of 9% from fiscal 2014. Our non-GAAP gross margin was approximately 50%, and our operating expenses were $1.3 billion, roughly flat from the prior year, as we kept a tight lid on spending throughout the year. This resulted in an operating margin of approximately 16%, an improvement of 100 basis points from fiscal 2014. Interest and other income totaled $23 million, and we had a tax credit for the year of $3.2 million, resulting in a non-GAAP EPS of $1.15, an increase of 13% from fiscal 2014. Our fourth quarter financial results were overall on target with our guidance, while revenues were below guidance, our gross margin and EPS were above the midpoint of guidance. We reported revenues of $857 million for the fourth quarter, which was a decline of 8% sequentially, driven mainly by seasonality and lower mobile sales. As Sehat said earlier, LTE volumes continue to increase, and the decline of our 3G business will have less of an effect on the overall mobile business starting in Q1. Although the pricing environment is getting more competitive, we are confident that we can win our fair share of 4G smartphone design wins and continue to see meaningful momentum throughout this year. Moving on to details on our various end markets. For the full-fiscal year 2015, our mobile and wireless business increased 28% and represented 29% of overall sales, driven by the first year of LTE smartphone ramps in China, and connectivity shipments into gaming consoles, access points, printers, and the Chromecast. Our mobile business grew over 35% in fiscal 2015 compared to fiscal 2014. In Q4, our mobile and wireless business declined 19% sequentially and represented 24% of total revenues. In networking, for fiscal 2015, our revenue grew 1% and represented 18% of total sales, which was consistent with the overall enterprise spending environment last year. In Q4, our networking revenues declined 3% sequentially and represented 19% of Q4 sales consistent with a soft seasonal quarter. In storage, our fiscal 2015 revenue grew 4% and represented approximately 47% of total sales. We saw growth in our HDD business and another year of strong double-digit growth in our SSD business. In Q4, storage sales declined 4% sequentially roughly in line with our expectations and represented 51% of total Q4 sales. Moving next to margins and expenses. Our non-GAAP gross margin for the fourth quarter was approximately 52% which was above our guidance range and improved 80% -- 80 basis points sequentially. Contributing to this increase in gross margin was a sell-through of previously reserved inventory. Non-GAAP operating expenses came in at $315 million, better than the midpoint of our guidance range, due to continuing operating discipline across all our businesses. This resulted in a non-GAAP operating margin of 15% for the quarter, 50 basis points better than the midpoint of our guidance range. Net interest and other income was about $4 million and we recognized a tax expense of $2.5 million in the quarter. This resulted in non-GAAP net income for the fourth quarter of $131 million or $0.25 per diluted share. This was $0.01 ahead of our guidance. The shares used to compute diluted non-GAAP EPS during the fourth quarter were $533 million. Cash flow from operations for the fourth quarter was $155 million, and free cash flow for the fourth quarter was $135 million or approximately 16% of revenue. Now summarizing Q4 results on a GAAP basis, we generated GAAP net income of $82 million or $0.16 per diluted share. The difference between our GAAP and non-GAAP results during the fourth quarter was mainly due to stock-based compensation expense of $38 million, $3 million of restructuring expense, $3 million of legal indemnity guarantee cost, and $4 million expense related to amortization and write-off of intangible assets. Now turning to the balance sheet. Cash, cash equivalents, and short-term investments, as of the fourth quarter was approximately $2.5 billion, an increase of approximately $130 million from the previous quarter. We also used $20 million to buyback approximately 1.4 million shares of stock during the quarter. We currently have about $443 million remaining in our authorized repurchase program and will continue to be opportunistic in our buybacks. We also paid dividends of $31 million in the quarter or approximately -- or equivalent to $0.06 per share. Net inventory at the end of the fourth quarter was approximately $308 million, a decrease of about $48 million from the previous quarter as we continue to manage our inventory. Moving next to our outlook. For the first quarter of fiscal 2016, we currently project revenues to be in the range of $810 million to $830 million. At the midpoint this would equate to approximately a 4% sequential decline. We expect our storage business to decline sequentially, our mobile and wireless business to decrease slightly, and our networking business to experience modest growth. We currently project non-GAAP gross margin of 50.5% plus or minus 100 basis points and currently anticipate non-GAAP operating expenses to be approximately $320 million plus or minus $10 million. We anticipate R&D expenses of approximately $265 million and SG&A expenses of approximately $55 million. At the midpoint of our projected guidance, this should translate to a non-GAAP operating margin of approximately 11.5% plus or minus 100 basis points. The combination of interest and other income should net out to approximately $2 million and we expect tax expense to be approximately $2 million. We currently expect the diluted share account to be approximately 535 million shares. In total, we currently project non-GAAP EPS to be $0.18 per diluted share plus or minus $0.01. On the balance sheet, we currently expect to generate slightly over $100 million in free cash flow during the quarter. We anticipate our cash balance to be about $2.6 billion, excluding any M&A activity, share buyback, or other one-time items. We currently expect our GAAP EPS to be lower than our non-GAAP EPS by about $0.09 per share. With that, I'd like to turn the call over to the operator, to begin the Q&A portion of the call. Operator?

[Operator Instructions]. Your first question comes from the line of Craig Ellis with B. Riley. Please proceed.

Thank you for taking the question. Sehat, I just wanted to follow-up on the comments that you made around baseband pricing. Can you discuss in more detail where you're seeing LTE baseband pricing being more aggressive is it in octa-core parts, quad-core parts, and what's been the trend with pricing steadily down or have there been discontinuities?

Weili, you want to cover that?

Sure, yes, well it's a highly competitive market and LTE is definitely taking off in a big way. The quad-core pricing is actually moving down quite significantly. As you can see this past quarter, we -- our volumes went up but overall revenue side, if you see, it's pretty humble from that standpoint of view. Of course our octa-core is fanning momentum for design wins. So we are very committed and we are very bullish about our continuation with supporting customers and gaining market share in that space.

And as a follow-up to that question, Weili, can you just identify what the mix is between LTE and 3G baseband from a revenue standpoint. And as we look out through the year how should we expect that to evolve as we go through calendar 2015?

Marvell's standpoint of view, of course we are driving LTE to the max.

Yes. So, hey, Craig, this is Sehat. We have -- we did see a big continuation of this 3G down ramp we talked about in the last quarter as well. And I think it shouldn't come as a surprise given our exported to one of our big Asian OEMs there. We probably are towards the tail end of that I would guess may be towards -- by the end of this quarter we should be predominantly done with that 3G business and moving forward will be mostly LTE.

The next question comes from the line of Harlan Sur with JP Morgan. Please proceed.

Hello, good afternoon, thanks for taking my question. So on the mobile business, this is I think probably the second quarter in a row that mobile has disappointed and I think that in my estimates I think your 3G business got cut in half again this quarter. And on the 4G front while you are on the cusp of driving solid growth and still have a strong number two position relative to Qualcomm, obviously pricing continues to be aggressive and R&D investments to drive an aggressive roadmap continued to be high. There has been some speculation about the potential for strategic alternatives for the mobile business. Sehat, at what point do you start to look seriously at strategic alternatives for mobile. My estimate is that if you strip out the mobile business, you end up with a business that is driving kind of low, mid-single-digits top-line growth for driving 20% plus operating and free cash flow margin. So your thoughts on the level of commitment on the mobile business, and your willingness to explore potential strategic alternatives?

Okay all right. So that's a lot of questions -- a lot of -- let me answer them one by one. In terms of the reason why you're seeing our competitors reacting to our entry into the LTE business aggressively this actually gives us a good feeling, a good sign that our technology is indeed is world class. Okay. We only actually have, we're in terms of volume, we're small player compared to that 800-pound gorilla. But we've to have 800-pound gorilla realize that okay, we -- our solution is a real threat, okay, to their existence. So they're reacting to scale us from getting into this business. So we're not going to back off of this business, we continue to build even more advanced solution. Now, of course we have to make sure that we manage our expenses accordingly. Now with respect to the second question on strategic opportunities, yes, there's lot of people asking this question. Our answer we made it very clear. We as a management company will consider anything that make sense to the shareholder, anything that will bring the share value of a shareholder up is our responsibility to entertain and manage and look at all the different possibilities. But for sure okay we are not backing off from this business. And if you look at some of the technology we're building like tomorrow I'm going to give a presentation, the plenary talk at the ISSCC you probably you will have the time to attend ISSCC Plenary at 10'clock you will hear some of the new direction that I'm driving to drive the technology development to completely differentiate us from the rest of the world. So -- no, sorry, not tomorrow, I made a mistake on Monday. Okay Monday at 10 'clock in San Francisco. So you would see that we are actually -- we are going to become a real threat to many of the top players in this market.

Harlan, did answer your question? Do you have a follow-up?

Yes, my follow-up to that is, I don't disagree with all the points that you made as it relates you guys been a strong number two, I do think that you guys have a very strong and competitive 4G chipset roadmap. But I think the other concern, in addition to just driving shipment growth, and revenue growth, is the confidence level in driving sustainable and potentially profitable growth within the mobile business going forward. And so assuming that you can grow your 4G mobile business in terms of units and revenues, what are you doing to improve the margin profile in this very aggressive pricing environment?

Yes. Okay, we talk about it actually last -- even last quarter. The one of the missing items from our roadmap is not we don't have strong 4G roadmap. To the contrary we have very strong 4G roadmap. We have the -- our LTE events is already in the customer okay development stages, okay we have very advanced carrier aggregation the technology, including aggregations from TDD with FDD LTE. So we actually -- we actually at the leading edge of the carrier aggregation roadmap. What missing okay that we talk about in last quarter was the turnkey. The turnkey solution actually will give us more, much higher growth, much higher margin, because we are dealing with many, many customers they will be -- with the turnkey solution we can deal with many customer basically just pushbutton and build momentum. And those customer base will give us higher margin. So this is the area that we say we're committed to deliver and at the end of Q1, we will have the completed cases for Q1, to be starting to deal it with the customers for hopefully production okay the next quarter or so.

Your next question comes from the line Doug Freedman with RBC. Please proceed.

Hi, thanks for taking my question. When we look at the mobile and wireless group, you do have the Wi-Fi business in there, but yet it's very hard for us to decide for between the Wi-Fi business and your baseband business. Is there any color that you can offer to help us understand what the different trends that you're seeing in that business are?

I'll cover a little bit and then may be somebody else can chip in here. So on the FinFET its clear that 100% attachment rates of our Wi-Fi, but our Wi-Fi business is not just for the handsets okay in fact we started the business in other areas. So we're strong in Wi-Fi in the enterprise access points and with basic carrier based access points those were the very, very high-end 4x4 Wi-Fi chips targeted for multi-bands, okay multi-users access points. With forming circuits to address the Wi-Fi, with the coverage inside an office building we tend to have complicated, okay, multi-path impairment. So those one area of the business where we are strong at. The other areas we're strong at -- at the gaming like those devices goes into the playstations and Microsoft gaming devices. And also if you look at the Chromecast dongle devices, these are like the emerging form factors they will allow any TVs, including TVs they have been shipped for the last 10 years to be starting into a smart TV. And those solutions comes with also a 100% attachment of our Wi-Fi and but it's the Chromebooks. Okay the Chromebooks we're strong at Chromebooks because we are the de-facto standards for the 2x2 Wi-Fi in the Chromebook ecosystem. So as the Chromebooks market exhaust and we expect that with more and more acceptance over the years we see we will have okay more and more volumes okay from that market. Is that anything else you want to add?

Sure, yes, of course the IoT model is the leader moving forward drives the overall IoT, which is a significant growth, so that Wi-Fi technology is very critical.

I guess I'll start to understand question may be a little bit more clearly, what I was looking for is the percentage of mobile and wireless that is related to non-cellular?

Yes, we don't divide that. We don't divide that.

So Doug, as you know, we haven't provided that breakdown mainly for because if we do have a lot of business that are tied to mobile, we have a lot of business that we can't really distinguish. So we shouldn't be distinguishing that, so will shy away from that.

All right. I guess if I could try another one then. If we look at your business where you've guided revenues now we're going to be down over 14% year-on-year but yet you're saying that you feel confident you can get back to revenue or have revenue growth in 2016. That calls for some very above seasonal sequentials for the balance of the year, most notably especially in the wireless business, should you want the wireless business mobile and wireless to grow, I've got over 20% growth per quarter. Is that something that you think is a reasonable expectation for the market to have at this point?

We've seen that before so number one. Number two, is we -- this time on, okay we also have two chips in a given time coming into the LTE space, basic almost at the same time back-to-back. And number three, we have LTE Advanced going into introducing LTE Advanced. So what the second half of the year, we believe that our LTE business is going to be improved quite significantly.

All right. Great thank you. I'll leave it there.

Your next question comes from the line of Quinn Bolton with Needham. Please proceed.

Just wanted to follow-up on the pricing question for LTE, obviously it seems to be a hot button here. But you sort of talked about pricing in the quad-core solutions, wondering if you can give us some sense is that built across 32-bit and 64-bit? Are you seeing better pricing even at quad-core for your newer 64-bit solutions? Just really trying to figure-out if there's any place sort of the hide in the LTE market, where you might have pockets of better pricing. And then I will got a follow-up question?

We're moving all our solutions away from 32-bit. So in LTE's every single chips that we're building right now, okay, the ones that we're introducing, okay, we had introduced the last quarter, two quarters, are all 64-bits. Our first generation LTE was 32-bits but we're moving away from 32-bits. So in terms of what was the second part of the question?

So this question was more pricing within the LTE business?

We don't have 32-bit. We're not -- we're moving away from 32-bit, so we cannot even talk about it price differentiation. We want to drive the -- as the new player into the market, okay we want to drive the change. So we don't want to play in the game where the existing player playing the 32-bit, like the strong 32-bit. Okay let them, if they want to stay there that's fine. But we want to, the market to move sooner with the next generation solution.

Thank you. If I hear you, you had it, sounds like the pricing even for 64-bit quad-core has become very aggressive?

Yes.

Yes.

Okay. Thanks for that clarification. And then the second question I had just on the storage business I heard you right, I think you said that storage was down about 4% sequentially but HDDs were actually up and I just want to make sure that that was the case because if that's the case it sounds like the SSD business may have seen a fairly significant decline considering it's a much smaller business than HDDs? If that's all correct, could you say what's going on in the SSD that might have resulted in that sequential decline in the January quarter? Thank you.

So Quinn, you're right our SSD business is seasonal weak in Q4. Nothing more than that in our HDD business obviously we're beginning to see some share gains. I think we’ve talked about in the past few quarters that continues. And we just see some seasonality -- seasonal declines in our SSD business for the quarter.

Your next question comes from the line of Hans Mosesmann of Raymond James. Please proceed.

Thank you. A question on the TCAM business or Questflo. How was the design activity there and what kind of market share can you get over say the next 18 months?

Yes, the Questflo the feedbacks that you're getting from, okay, any customers basically any customers they're looking into this devices, they all were blown away with this capability. So the first reaction obviously is like, is this real, and they start looking at that data and then they realize that is real. So that's the reason why we say not surprisingly okay we're getting every single month we're getting better and better traction. You're asking for the next 18 months, okay, you have the actually this is the right question, because in the enterprise application this is the big design cycle, it's long cycle. The good thing is we're entering this market with a completely new differentiating technology. So we believe in the next year to 18 months we will -- sometimes the next 12 months or 18 months we'll start seeing that this product ramping into production with deigns wins, activities, design cycles, okay in the next 12 months for new products to be released, again as you correctly questioned 18 months from now. At that time we should be going production.

Yes. My question is market shares, is some kind of an expectation or a target to get to profit scale?

Yes, we believe, okay this is almost like a zero-sum game. Okay, so if you -- what is that --

Zero-sum game.

Zero-sum game. So either we will own or nothing, so when the -- the best part really for the big data carrier grade system. In the carrier grade big system, the requirement is bigger, you need to have a bigger and bigger table, but one of the -- so they have two choices, they can buy, two or three chips from our competitors, with each chips anticipating 100 watts or more, or and then if I do a addition chip, this have to be air-condition in -- in the remote office, in the central office, or they can reduce our technology and have much, much bigger capacity in a single device at much lower power. So we believe that we can get basically a major, if not a majority of the new designs that's coming in the next 18 months or so.

Your next question comes from the line of Sanjay Chaurasia with Nomura. Please proceed.

Well hi, Sehat, one question on LTE. Could you give us any color on the 50%, is that quarter-on-quarter increase in that LTE shipment volume, was it driven by your largest customer, or was it equally driven by China OEMs? Because it seems you're saying that the China momentum hasn't started yet because your turnkey solution will be available only in the end of Q1?

Do you want to cover that?

Yes, this is across the board for all of the customers.

Could you give us any color whether the biggest customer was driving, is driving more of the SAM versus other OEMs?

No, I think it was turnkey.

I think the answer was suffice a bit, even though we don't have turnkey, we still have customers, even in China, they're not turnkey customers, but they are working -- they have people -- their own engineers working on the handsets.

It was across the board, Sanjay, we wouldn't point to any one -- any given area, any given geography or customer.

Okay. And as a follow-up, Sehat, if you look at LTE competition coming down, MediaTek said on their call, they're increasing their OpEx primarily in the LTE R&D area by 20% in this year. And as you go, try to go outside of China, try to add these complex new LTE Advanced features in your roadmap, how confident are you that you could deliver all that in your current OpEx run rate?

Yes, we already sampled our LTE events. So we are up right now -- if the -- if the certification process so in some -- most of the -- if you look at the modem technology, we have more than enough investment. We have -- the investment that people are talking about and people, I mean, investors worrying about is that it's not actually in the modem side, if we need to build a turnkey, we need to get the software, there is nothing to do with the modem. They're making the application to be plug-and-play versus just building the modem. If it was only the modem okay, we are well ahead, way ahead than MediaTek, we are the only one that have out of Qualcomm having the hardware modem today in the market, everybody else are still using the software modem. So since you're talking about LTE Advanced, in order for MediaTek to deliver LTE Advance, okay I mean or LTE I don't see them talking for LTE Advanced. But if we're talking about, if assuming they're going to talk about increasing investments, I would not be surprised they have the existing investment, because if they have to build completely a new team, new direction from the software-defined modem to hardware-defined modem. So clearly okay, they have to increase the expenses, if they want to stay in this business.

Do you have a follow-up, Sanjay?

One, that I will take that opportunity though and that was a follow-up, one more question if I can squeeze in if it's okay. This is Sehat, again this is a big year for LTE in China volume potentially tripling this year and arguably this could be the biggest growth here in China in the next coming years. What are the metrics you have set for yourselves in terms of shipments, because you don't control the ASP environment, so I will not talk about revenue growth? But in terms of shipment growth and in terms of your share in overall shipment that will give you confidence and investors confidence that this is indeed is a sustainable business?

Yes, okay, I will say that like getting the turnkey to be out that the production sometimes may be end of Q2, will give us, okay will -- should give investors huge confidence that okay our volumes, we're going to get our fair share of the LTE. So we just thought -- I thought everybody in the world moving to LTE. Even people in the developing world they're probably are talking about LTE. So if we're not talking about China growth opportunity the global opportunity of the LTE is also just the same.

Your next question comes from the line of Ian Ing with MKM Partners. Please proceed.

Hi, yes, thank you. So more on wireless in China, what's your exposure to the FDD version of LTE, we're waiting for the commercial licenses for China Unicom and China Telecom, should we think of it as a similar exposure as TD China Mobile? Thanks.

Well, Weili, do you want to cover that?

Well today, LTE solutions we already addressing China Mobile and as well as China Unicom and so we're working with all the top tier OEMs in China as well as global OEM. So we are very well positioned.

Okay. So FDD should be -- is FDD included in your estimates this year then?

Our LTE is final, yes. It is a global solution.

I think a bit -- I want to clarify, I want to clarify so if you look at all the -- even in China every carriers whether its China Telecom or China Unicom, they all want to have the defined mode, because they want to be able to, lot of handsets are built in multi-SIM, dual-SIM capability. So people, customers want to have a flexibility to have may one SIM put on China Mobile, one SIM put on China Unicom. So it is -- and then nobody wants to okay, to buy two different LTE handsets for that purpose. So as a result it's very -- what you're hearing is that is like every -- almost everything has to be defined mode. So we're delivering that so it's two asset case, no difference whether you have China Unicom or just trying to go to South America or to go to Europe this is the same FDD else TDD it's all the same device.

Great. And my follow up is in storage, looks like there is the potential for MOFCOM to approve the Western Digital Hitachi combination. Should that happen, is there any share gain opportunity that seems Hitachi is more of a LSI/Hidalgo customer?

Yes, we're working with; we're already working with Hitachi so we will continue to work to gain the share at Hitachi. So I don't think has nothing to do with MOFCOM in the pattern of that.

So that’s been ongoing then, okay. Great thank you.

Your next question comes from the line of John Pitzer with Credit Suisse. Please proceed.

I guess Sehat; my first question is some of your peers will actually break out operating profit by division. Kind of curious is that something you guys have contemplated doing to try to give us a better sense of the profitability with the mobile and wireless. And if it's not can you help me better understand what longer-term returns or margin targets you're looking for in mobile and wireless for that to be a business it's worth being in longer-term?

Yes, okay we're not providing that kind of data. But what we can say even the last question when we were asked the same question we said -- you can make assumption at our mobile business and we're not going to say we're not profitable yet. So we will be profitable when the volume goes up. And these are the reasons why we're not; we're not trained chicken with this business. And the business is a skill, it's a skill business and we have the technology to become big in the business and if we make it, means that we're going to lose a bit, lose the shares, not make money in the next, in the beginning, it's already there. There's no -- that's why they've go into the ultra mortgage business they have to there -- in order they have to be willing to not to make money so that they can grow their business. So we're going to do the same thing.

That's helpful. And may be on my follow-up on the storage markets, you guys are sort of guiding for the current quarter for the storage to be down along seasonal lines, and I'm just kind of curious your confidence level around that given that a lot of the PC data point seem to be weaker than seasonal. What confidence do you have around just a seasonal decline and not worse? And if I could just tack on a quick one within storage, last week Seagate and Micron announced an agreement around SaaS, SSD drive, does that change at all the control of landscape for SSDs? Thank you.

John, I think we looked at the Seagate and Micron announcement doesn't really change our view to, think of our view we're working with both Seagate and Micron right. And so they're both customers of ours. So yes, it doesn't really impact our business in fact I think we'll continue to work with both of them. And well the other question was about HDD?

Your confidence around seasonality in the hard drives overall?

Right, right. So I think we watched the data points similar to what you guys watch very carefully what's happening to PC market. I think we're closer to our hard drive customers as you can imagine. At this point it means we feel relatively comfortable at -- what they've talked about for Q1.

Your next question comes from the line of Daniel Amir with Ladenburg. Please proceed.

Yes, thanks a lot. So your networking business on a year-over-year basis if I recall is up 1%. I mean can you give us kind of some data points here how you view the networking business this year I mean you would expect that business to actually grow a little bit faster than the 1% and what are the factors here going into also this quarter to lead us to that growing confidence? Thanks.

So if you look at the networking side okay, one of the -- which as mentioned earlier that the 10-gig base. This is an area there that potential could be a good, a very good growth opportunity for us. And the reason we can say this is because in the shootout, meaning that our customers would put our devices with our competitors. Our devices actually have the lowest power as well as the longest range. So we do feel comfortable that okay, over the -- with this new, okay, with the new -- our new, the latest 10-gig copper files, we will have to be able to get good growth opportunity. The growth opportunity for the rest of the like, the switch fabric, those are one that we mentioned earlier that will be working on it, our new devices will not be available for -- another few quarters. So this is the one that a little bit the one that giving us a little bit, like it's same again, it's an area that in the past we did not invest in. So -- but if we got a bit more Advanced Solutions out, we believe that we will be a step ahead from the existing suppliers because of their choice of architecture which is the older architecture. So the growth, bigger growth opportunity will happen next year instead of this year for the rest of the market. But we see that business we also have this controllers for mass storage, those devices will continue to increase in volume.

Okay. So essentially you expect somewhat of a similar fiscal 2016 to fiscal 2015 in terms of the networking business, in terms of growth rate?

Our expectation is right now at least for networking business is growth that's better than last year, for this year. We're planning for a better growth this year.

Okay. And just the one follow-up on the wireless connectivity business, I mean you gave some data points on how you see the mobile business growing this year. On the wireless connectivity, is it what's really going to drive the growth this year, assuming that it's going to grow is it the access point to the business essentially?

Access point business will always -- will continue to grow because these are lot long, these are very long design cycles. We've been looking on this for, I don’t know five years, six years longtime. So the customer tends to use one solution practical wire but as long as we continue to build the next generation they will stick with us. So that growth will naturally be there as more people wants to have wireless devices like mobile devices so the access points will continue to grow. The other areas clearly is this carrier, the carrier grade or service provider -- the service provider wireless will continue to grow as more and more service providers become more comfortable with using Wi-Fi for distributing videos to the TV to the set-top boxes. And then finally as the -- as we're introducing more and more advanced -- this micro set-top boxes that looks like a dongle into the consumers, these devices actually okay, were primarily based, not primarily today is only based on Wi-Fi. So those kind of -- those devices are so much more advanced pretty soon you have 4K, 2K devices -- devices smaller than a credit card and we'll be able to decode all this 4K movies. Well the existing set-top boxes can handle it and all that again will be using Wi-Fi technology. So we believe that those markets will have good opportunity for growth in the next -- this year and the -- and even moving forward.

Both access point 2x2 for the retailer space as well which is high volume as well.

Your next question comes from the line of Joe Moore with Morgan Stanley. Please proceed.

My question is on the China baseband market, do you see that market, is there a preference for sort of local content and if you look at like the deal that Intel did with Spectrum, does that create advantage for them because their view has been local content and is there, I mean you guys have obviously been there for a while and have some pretty deep partnerships. Can you just talk about that dynamic and what that -- how that helps or hurts you in the next couple of years?

Weili, you want to cover that?

Sure, yes I mean our mission in really focusing on providing the best or by solutions for our OEMs, of course our OEMs in the ecosystem whether or not China or localization or other regions that's more the ecosystem play. But for our responsibility we are delivering the highest quality and the best and most competitive mobile solution which we are doing very well and we continue to gain more design or more design wins and capture more market shares. So that’s our focus.

So I think, I want to add to this, [indiscernible] yes of course trying to -- we're prepared to have local suppliers. But we are local suppliers, our designs are done in China, we are not -- our design is not done in any other country. All this modem technology we talk about is built in China, these all is ecosystem built in China. So in a sense we are -- we are a local Chinese supplier in this business.

Okay. And the customers view it that way, I mean obviously that’s been the history of the company, but is there a government policy that works against you?

Well I think the best thing you look at based on the track record. I mean, as you can see over the years we were the first one, first semiconductor LTE solutions coming from -- supporting the biggest operator in China, the China Mobile by December of 2013. So this is based on the track record and then in terms of our advancements driving not only we're leading the LTE, we were the first one to empower this ecosystem and deliver the LTE solution for China specifically it is of course, as Sehat said, we are very strong player for local and we are also a global player.

Okay. We'll take one last question.

Your next question comes from the line of Kevin Cassidy with Stifel. Please proceed.

Thanks just a quick question and a clarification on seasonality for HDD and SSD. I guess the seasonal decline equal to those or is HDD lower or more of a decline than SSD or -- in just what are you seeing as adoption rate of SSDs on the client side?

So I think we're seeing similar seasonality for both, Kevin. The adoption rate for SSD obviously is improving, you hear from a lot of OEM, obviously there is different share dynamics that probably end up lying through the years its probably two early for us to comment on that but at least for the near term we see similarities and identities both.

Yes, in a society talking about that one thing I think it's worth noting is that the Marvell our SSG technology is very advanced and very robust. Reliability security high performance are these features and the quality of SSG solutions is absolutely world class. And when it comes to storage reliability security is a must and there are even though there are more players in the state but if you look at who has the real deal solid solution with us is a number one player is the storage place.

Okay, great. I just want this if they are both seasonally the same it seem like a SSD adoption would be slowing. But you are saying it's not?

We are consistent actually in the many, many last year we would talk about hybrid we do believe that take a long run both the adoptions of SSD is not okay is not that used HDD division we're going to do is again to create this opportunity to build hybrid devices by taking advantage of the instant on capability of SSD that is the reason why we are building this device we just produce last quarter the NVMe DRAM-less PCI SSG controller specifically targeting for entry level but very high performance nonetheless but led very cost but the SSG solution for the lower capacity market. And then customer can supplement the capacity filament by buying the additional HDD they will give them much higher capacity so if one time the cost. So maybe they spend so for the total cost of less than 12%, 13% of the through SSG cost they get much higher capacity. So this is the strategy they will be using also to expand the market opportunity for SSG.

That concludes our Q&A. I'll now turn the call back over to management for closing remarks.

Thank you. I would like to thank everyone for their time today, and continued interest in Marvell. We look forward to speaking with you in coming months. Thank you and good bye.

Ladies and gentlemen, thank you for your participation. You may now disconnect. Have a great day.