Can Marvell’s Balance Sheet Withstand This Charge?

Marvell also faces another patent infringement lawsuit brought by France Telecom (NYSE:FTE), which has accused the company of using its technology to make processors for Research in Motion’s (NASDAQ:RIMM) BlackBerry devices.

CHEAT SHEET Analysis: Will this $1.17 billion damages award be a negative catalyst for Marvell’s stock?

One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. Marvell’s stock plummeted on Wednesday, and as Amir noted, the District Court’s decision will affect the company’s shares for the duration of its legal battle. But more concerning is the effect that the $1.17 billion dollar penalty will have on its balance sheet. “If the ruling stands, given Marvell’s total cash position of $2 billion, we think this could represent a significant blow to the company,” the analyst wrote in a note seen by Reuters. He holds a “neutral” rating on the chipmaker.

Analysts at JMP Securities also believe the company’s position is much worse. Following the announcement of the verdict, the firm downgraded Marvell from a Market Outperform to a Market Perform, stating that size of the damages “significantly calls into question how much of a valuation safety net is in place for the stock.” The firm is concerned over how the verdict will impact Marvell’s balance sheet, especially in light of increasingly soft PC demand.

However, the chipmaker has said that it has not determined the fiscal impact of the ruling on its operating results for its fiscal fourth quarter, which will end on February 2.

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