Marvell’s outlook on the data storage continues to be positive as Western Digital Corp. (NASDAQ:WDC) and Seagate Technology PLC (NASDAQ:STX) continue to shed their dependence on PC hard drives and shift toward cloud storage with growing demand. Both companies had reported better-than expected results recently.
Western Digital Corp. (NASDAQ:WDC) continues to innovate and improve its offerings in the mobile end with the upcoming showcase of solid state hybrid drives (SSHD) and 5 mm ultra-slim hard drive technologies for tablets and other thin-and-light devices at Computex Taipei 2013. These would be the world’s first ultra-slim 2.5-inch 5 mm hard drives and SSHDs for the slimmest devices. On the other hand, Seagate Technology PLC (NASDAQ:STX) continues to cut costs and shift toward the cloud market while PC sales continue to decline with increasing customer dependency on mobile devices. However, after the consolidation in the HDD market, both Western Digital Corp. (NASDAQ:WDC) and Seagate Technology PLC (NASDAQ:STX) are expected to see P/E expansion as both companies now focus on profitability.
The success of the Storage segment is critical to Marvell’s operation as it accounted for 47% of its revenue last year. Although the mobile and the wireless markets remain competitive, Marvell Technology Group Ltd. (NASDAQ:MRVL)’s development on LTE should give it a boost in the long-term as China Mobile is determined to dominate the 4G market in China where Marvell’s five-mode LTE solution gives it multi-band capabilities.
With zero debt and a healthy balance sheet, the fundamentals remain strong for Marvell despite the declining revenue. The revenue should improve as storage demand continues to grow, driven by cloud storage. On the other hand, despite strong competition in the wireless and mobile end, Marvell’s LTE solution still has an edge and will benefit from China Mobile’s aggressive expansion.
The article Why This Stock Is Not Out of Favor originally appeared on Fool.com and is written by Nick Chiu.
Nick Chiu owns shares of China Mobile. The Motley Fool owns shares of China Mobile and Western Digital. Nick is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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