Three Risks Marvell Technology Group Ltd. (MRVL) Faces In The Year Ahead

Marvell recently released quad-core applications processors with integrated modems that are capable of supporting China Mobile’s wireless data platform. Although dwarfed by QUALCOMM, Inc. (NASDAQ:QCOM) and Apple Inc. (NASDAQ:AAPL) , Marvell’s market share of mobile apps processors is large enough to put it in the top 5 supplier list. Marvell’s processors are in 3 recently launched Samsung GALAXY smartphones all built to run on China Mobile’s TD-SCDMA and the more common WCDMA platform.

Marvell’s move into mobile application processors has so far been reasonably successful. However, a change of heart from China Mobile or Samsung could seriously damage the comany’s move into this crucial market.

Patent infringement litigation

Like any large tech company, Marvell is under constant legal attack. The company and its investors were blindsided by a billion dollar ruling against the company late last year. Back in 1967 researchers at Carnegie Mellon patented a mathematical formula for reducing signal-noise in analog to digital applications. Although Marvell has several patents for processes that it claims are more successful at reducing signal noise, a nine-member jury ruled that the company was guilty of patent infringement. The judge, in turn, fined Marvell about $1.17 billion.

As David Einhorn pointed out, there are many grounds for a dismissal. Most significantly damning to Carnegie Mellon’s case is the fact that US patent law does not apply to products manufactured and sold abroad. Since none of Marvell’s products are manufactured in the US and most are sold abroad the chances of this verdict holding are very slim. If this verdict does hold, or even worse if Carnegie Mellon is awarded triple its claimed damages due to willful intent, it would cripple Marvell, and lead to significant losses for shareholders like myself and Greenlight Capital.

The article Three Risks Marvell Technology Faces In The Year Ahead originally appeared on Fool.com.

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