Monday, July 12, 2010

Marvell Technology Annual Shareholder Meeting (2010)

I attended Marvell Technology Group Ltd. (MRVL) annual shareholder meeting on July 8, 2010. I know many engineers (thank you, high school Chess Club), and whenever my engineer acquaintances discuss semiconductor companies, Marvell is mentioned in almost reverential tones. As a result, I was happy to be able to attend my first annual Marvell meeting, which took place at the Hyatt Hotel in downtown Santa Clara, California.

First, the food was wonderful. I appeared to be the only non-employee shareholder who attended, so I happily helped myself to Powerbars, yogurt, coffee, soda, mineral water, regular water, and fresh and dried fruit. Props to Hyatt Hotel for creating a great experience.

Prior to the meeting, I had watched an excellent documentary about America’s ascent to the moon, called In the Shadow of the Moon (2007). I was struck by the entire world’s rapt attention to America’s technological progress in the 1960’s. Today, although many Silicon Valley companies are generating major technological leaps and bounds, few laypeople follow such companies closely. It’s assumed that tech companies will continue to great the “next new thing," but such an assumption may be flawed. For example, NASA was able to propel America to the moon by using major taxpayer dollars and incentives. Perhaps the federal government's clean energy incentives will bear fruit eventually, but I still don't see Americans coming together on science and technology like they did during Kennedy's era.

In any case, Marvell didn’t look like it was used to having too many non-employee shareholders attend its annual meeting, but it graciously allowed me to ask a few questions and get some one-on-one time with the Chairman, President, and CEO Dr. Sehat Sutardja. Some interesting facts:

1. Marvell is “debt free and ended the year [fiscal 2010] with nearly $1.8 billion of cash” on its balance sheet.

2. Marvell’s founders continue to play significant roles. Dr. Sehat Sutardja (President CEO) is married to Weili Dai (VP of Sales) and is the older brother of Dr. Pantas Sutardja (CTO). Collectively, these three people own approximately 17% of Marvell’s outstanding common shares. (See 10K, page 31.)

3. For the year ended January 30, 2010, two customers accounted for a total of approximately 39% of Marvell’s net revenue. (See 10K, page 21.)

I noticed the customer concentration, so I asked how easily these top two customers could leave Marvell and go to a competitor. CEO Sutardja responded that Marvell’s products were highly differentiated, with numerous design wins, and Marvell works hard to make better products. He continued, saying that Marvell’s technology makes its customers successful, and when customers become successful, they become bigger. In short, we will be seeing “fewer but bigger customers in the long run,” which explains Marvell’s customer concentration. Dr. Sutardja also remarked that Marvell’s customers “can sleep well,” knowing that Marvell is doing everything it can to help make its customers successful.

I asked my usual question, “What do you see as your biggest challenges?” Dr. Sutardja remarked, “following Moore’s Law.” To summarize, the pace of modern technology is so fast, you must quickly innovate, or you will be left behind. While Coke and Pepsi can continue to rely on the same basic formula for decades, no technology company can stand still and expect to survive. As the CEO remarked, you can’t find a semiconductor company selling technology that’s ten years old. Basically, “if you sleep for 18 months, you are behind by a factor of 2, and if you sleep for 36 months, you are behind by a factor of 4.” In addition, newer generations of IC chips will have more circuits placed on them, making the IC chip design process increasing more complex. On the plus side, if a technology company is successful, other companies tend to buy products from companies with proven track records–another reason for Marvell’s success.

Disclosure: I own an insignificant number of Marvell (MRVL) shares.

Sunday, July 11, 2010

Wislawa Szymborska

When the piranha strikes, it feels no shame.
If snakes had hands, they'd claim their hands were clean...

On this third planet of the sun
among the signs of savagery
a clear conscience is Number One.

--
Wislawa Szymborska

Friday, July 9, 2010

Barry Deutsch's Cartoons

Barry Deutsch has some very funny comics HERE. Be sure to check out the one about the different types of libertarians. I wonder which one I am...

Thursday, July 8, 2010

Jack Paar on Flattery

"No matter what other nations may say about the United States, immigration is still the sincerest form of flattery." -- Jack Paar

Wednesday, July 7, 2010

VeriFone Annual Shareholder Meeting (2010)

VeriFone (PAY) held its 2010 annual shareholder meeting at company headquarters in San Jose, California. CEO Douglas Bergeron handled most of the meeting, but Senior VP and General Counsel Albert Liu also played a significant role.

The person manning the front desk offered only coffee to visiting shareholders, but we later found a small treasure trove of pastries, Egg-McMuffin-type sandwiches, and Odwalla juices on our own. (Note to VeriFone: if you're going to have food and drinks, have some class and offer some to non-employee shareholders--don't hide the goodies in the back. Also, the coffee was terrible. Sigh.)

I estimated that fourteen people attended the meeting, including just three non-employee shareholders. Prior to the meeting, one of the attendees mentioned that he recently traveled to Cleveland, Ohio and was very impressed with the city. Members of the Board of Directors praised Cleveland, calling it a hidden gem. (Personally, I believe LeBron James will stay in Cleveland, Ohio. If you read the book, Shooting Stars, it's hard to see LeBron James turning his back on Ohio.)

VeriFone didn't have an informal presentation, so we went directly to the Q&A session after the business portion of the meeting concluded. Some shareholders asked a few questions. One shareholder asked about payments/purchases via cell phone. CEO Bergeron responded that the security of cell-phone-payment transactions was currently "questionable." At the same time, VeriFone was working on a way of encrypting personal/financial data before it reaches the cell phone, making the transaction more secure.

I asked why international sales of System Solutions had lower gross margins than North American sales (see 10K, page 27). CEO Bergeron indicated that homogeneity leads to a premium. After the meeting, I asked him to clarify his answer, and he indicated that if you're trying to sell someone 10,000 machines for the first time, obviously the price will be lower versus a situation where you've already sold a company 100,000 machines. Why? I surmised that the more machines VeriFone sells to a particular company, the more the company benefits from scale. Thus, once a company allows VeriFone to set its payment standard, disengagement might be difficult, which gives VeriFone more pricing power.

All of the people attending the meeting were male, and, with the exception of one employee (Mr. Liu), all of the Verifone employees appeared to be at least 50 years old. I asked the CEO about his thoughts on diversity. He responded that VeriFone was open to diversity and recruits the "best and the brightest," which, in this case, happens to be "middle-aged, white" males.

Overall, VeriFone's meeting was short and simple.

Disclosure: I own an insignificant number of VeriFone (PAY) shares.

Tuesday, July 6, 2010

Homeland Security Coming to a Screen Near You?

The Department of Homeland Security is now pursuing people who download illegal movies. Why? Because they consider illegal downloads part of the war on terror. Yes, they are being serious. Civil-liberties-be-damned and mission-creep serious. More HERE.

“The reason the Department of Homeland Security is protecting Shrek is because we are all about protecting the homeland. We’re all about protecting American interests,” says John Morton, assistant secretary of DHS...“If you don’t think undermining Hollywood’s ability to produce a “Shrek,” undermining the creativity that goes into creating a “Shrek,” undermines the United States,” Morton says, “you are sadly mistaken.”

Who the heck pays these people? Oh, wait, we do. Sigh.

Sunday, July 4, 2010

E.B. White and Independence

E.B. White: "I think the Court again heard clearly the simple theme that ennobles our Constitution: that no one shall be made to feel uncomfortable or unsafe because of nonconformity."

Happy 4th of July.