Marvell Technology, Inc. (MRVL) Goldman Sachs Communacopia + Technology Conference (Transcript)

Marvell Technology, Inc. (NASDAQ:MRVL) Goldman Sachs Communacopia + Technology Conference Call September 11, 2024 6:45 PM ET

Company Participants

Matthew Murphy – Chairman and Chief Executive Officer

Conference Call Participants

Toshiya Hari – Goldman Sachs Group, Inc.

Toshiya Hari

Okay. Great. I think we’re live. Good afternoon, everyone. Thank you so much for coming. My name is Toshiya Hari. I cover the semiconductor space for Goldman. Very psyched, very honored to have the team from Marvell with us this afternoon. We have Matt Murphy, Chairman and CEO. And we have Ashish Saran, Vice President of Investor Relations. First of all, thank you so much for coming, guys.

Matthew Murphy

Appreciate it. Yes. Thank you. We’re psyched to be here, too.

Question-and-Answer Session

Q – Toshiya Hari

So Matt, on your recent earnings call, you spoke to your AI business potentially exceeding your prior targets, fiscal 2025, fiscal 2026. And I know you’re not giving specifics here, but I was hoping you could kick us off by speaking to how your outlook has evolved. You had a big event back in April. How have things evolved? And what are the some of the key drivers that you’re focused on?

Matthew Murphy

Yes. No, great question and happy to set the context. I think it’s actually kind of unbelievable if you think about where we were, and I’m going to go back to May of 2023. So not that long ago, right, a little over a year ago. We took our time, but we sized our AI opportunity at – then, and we said, look, we, for fiscal 2024, which was last year, could do $400 million in revenue and then $800 million for the year we’re in. That was in May. And then as the quarters went on, we kept overachieving and outperforming to that. When we had our AI day in April, we sized it for this year than at $1.5 billion, right? So just not that long a period of time, really less than a year, effectively, the opportunity had over doubled or about doubled in size.

And then we sized for next year, our fiscal 2026, $2.5 billion. So that was sort of the step-up. In our most recent earnings call, we said, look, business is strong, both on the custom side as well as our optics side. And so that we would exceed the $1.5 billion for this year, driven by both of those, by the way. And then that’s also going to carry over into next year. So it’s been evolving really nicely.

The other thing that happened was earlier in the year because the demand ramp had been so strong, especially in the optics initially, we had a bit of caution in terms of what the slope of that ramp could look like as it went up so fast. And the other thing we said in the recent call was that actually every quarter this year, we foresee our optics revenue to be up sequentially. So Q1 to Q2, Q2 to Q3 and even Q3 to Q4 as we build backlog. So business momentum is very strong. Production ramps are going really well on the custom silicon side. We have a great setup into next year. And a very compelling technology roadmap that I think is really resonating well with our customers in terms of the long-term positioning we have at Marvell for this really once-in-a-generation type opportunity.

Toshiya Hari

That’s great. Thank you. A couple of questions on the custom compute side. So again, at your AI event, you laid out a long-term growth outlook of 45% for the accelerated custom compute market. And in this outlook, I think you’re assuming that custom processor grow from 16% of the market last year to 25% in 2018. I’m sure a bunch of work went into this the analysis. How did you and your team land on the 25% number? Do you see custom processors competing effectively with GPUs in external workloads? Or do you expect custom processors to mostly address internal workloads?

Matthew Murphy

Yes, great question. So a couple of things went into that. The first is we said – and just to kind of give you a range, we said 20% to 25% would kind of be the range. And we don’t know, right? You could sort of debate around the edges. But it’s a big number, and we continue to have very strong conviction in the growth of that market and that sort of TAM materializing over time. We arrived at that number – that range through a couple of different ways. One is obviously using industry analyst resources and data. We built a pretty, I think, solid and comprehensive bottoms-up model. Just based on the programs we know about that we have and also that are out there and what the magnitude of those look like. But a key part of that was we didn’t put really a lot of penetration at all comprehended in the external workload side.

So for us, if that were to materialize, which is the aspiration, I think of a lot of our customers, we’ll see how they do, then that would be an upside scenario to Marvell because that would just sort of increase the percent towards the high end of our range or even higher. And we’ve been getting this question a lot just in the one-on-ones that aspirationally, I think our customers talk about wanting to increase that percentage. Then there’s just the reality of timing and when you can get there and how many workloads are going to be available. So our view is that was a pretty thoughtful judged view and certainly has a lot of upside to it potentially depending on how things play out.

Toshiya Hari

Okay. That’s very clear. Thank you.

Matthew Murphy

But I mean just to kind of step back and say, like we were talking in another one-on-one about, we got into this custom business through the acquisition of an asset from GLOBALFOUNDRIES called Avera Semiconductor, which spun out, which was the original IBM custom microelectronics team. And I don’t think we – anybody could have foresaw that, that acquisition would have opened up a $40 billion accelerator TAM, where we could actually go get meaningful content in. So it’s amazing how much has happened in five years if you think about it. So when I think about the next five years, I really don’t want to cap it, but that’s the current view we have.

Toshiya Hari

Okay. Really helpful. Maybe a good segue into my next question, which is on sort of the competitive differentiation you guys have, again, in custom compute. You have a credible competitor here in the U.S., but you also compete with smaller players in Asia. How would you describe the sources of your competitive differentiation? And what factors typically sort of drive design wins or not in custom compute?

Matthew Murphy

Yes. I think the industry trends are really what are in our favor, and I would say, would favor large, scaled up, highly integrated suppliers to go do the job. And that’s basically borne out of the following that. And now we’re deep down the road, right? We’re ramping two projects right now. We’ve got more in the pipeline. So we kind of know what this takes now. And it’s a combination of things where – and it’s not just having one piece. So it’s not just like having, well, I have the best like kind of single piece of IP over here or I’ve got a good set of engineers that can do a really good job on the back end or hey, I have a packaging team, packaging third-party.

So there are third-party ways that people might try to get to the final solution. But when we look at what it really takes to ramp one of these into volume, it’s the combination of quite frankly, front-end design resources, world-class back-end resources, leading-edge package technology, massive scale relationships with suppliers, including not just for nanometers and process nodes, but also the packaging side, substrates, the ability to have the OSAT capacity to actually ramp in volume, the product and test and manufacturing engineering personnel that can drive yield improvement, the quality in FA people.

And you start layering all these things in and the ability to invest big time in not just one process node ahead but really two and drive process, I/O, IP, packaging, all these things together in concert, our view is that in the end, when the TAM sort of evolves and what is shipping and volume, I believe it’s going to come from companies that have an integrated offering here and can deliver it.

And can provide the confidence to these customers that we can actually get the chip into production, shipping with high quality and high reliability deliver the TCO they need and already beyond the next one and the one after. And that’s our take on the whole market. Of our large competitor, each has great capabilities, technologies. It’s always a ferocious battle, both very good companies. But I think the market, if it goes from whatever it is today, $7 billion, $10 billion to $40 billion, and you look at the sort of evolution, it’s going to be, I think, a great opportunity. If you’ve put in the work and you’ve got the basis now to compete. And really, it’s come down to a couple of companies in our view they can do that.

Toshiya Hari

Okay. Great. Makes sense. At the event, you guys talked about three customers, four projects, you’re ramping on two. I’m curious what kind of visibility you have into the projects, particularly the ones that are on the come? And I guess, medium to long-term, what kind of market share do you all aspire to as it pertains to accelerated custom compute?

Matthew Murphy

Yes. We have a very, I think, a very solid seat at the table. I think on pretty much every major opportunity that’s out there today. And again, that’s really not only because we’re executing on current programs, but I think on the basis of our – I think our industry-leading and compelling roadmap, we get the meeting, we get the opportunity. Now we’ve got to go close it, we’ve got to go win it, but tremendous amount of design activity that’s been happening in this area, especially since the Gen AI thing hit early last year. So that’s sort of continuing.

Our Marvell President, Raghib Hussain, who’s been with me since the Cavium acquisition, he was Co-Founder there, and he really and I together kind of had architected this whole data center strategy for Marvell on the pivot here and he helped drive a lot of the M&A and now he’s running the big team running custom. I mean he stood up there at the AI day and said, look, we got a $40 billion TAM, and I would be disappointed if me and my team couldn’t drive at least 20% market share in that area. So he set a bogey as a long-term target for where we could get to. So if you think about $500 million-ish this year is what we signaled, right, 1/3 of the $1.5 billion kind of plus.

Next year, we had signaled that it would be like $1 billion, but now that’s kind of a plus because it’s we’re achieving and some line in the future to high single billions. I think it’s a great aspiration for the team. And I think it’s achievable if you look at what some of these other big programs have been able to deliver over time. So that’s kind of our guiding light at some point. We think the TAM is big. We’ve got the programs in place. We don’t know exactly how this is all going to play out in terms of which program is going to go to what volume and the exact timing and along the way, I know our investors, because it’s such a competitive area, there’s a lot of noise in the system at times.

We tend to just kind of try to look through all that with the first premise I talked about, which is what it’s going to really take to ship the chip in the volume and make it happen, and we think we’re going to be there. And then I think we’ve set a reasonable share target. So if the TAM materializes, which is on its way to do, we should be in great shape and have a great growth business in front of us.

And if it can upside along the way, that would be fantastic because there’s other things that may come into play. Like you said, how is this monetized what happens with the workloads. So we’re just going to let that play out. But right now, we’re heads down on execution and making sure, again, we have the best-in-class technology roadmap for accelerated computing from a platform offering for our customers who have their own silicon ambitions in this area.

Toshiya Hari

So Matt, to your point, the timing of projects, the volume of projects, there’s always uncertainty. When you and Raghib and sort of the broader team sit down and sort of think about various projects and particularly new projects, how do you – what decides whether or not you pursue a project and follow through with the project or take the project, if you will? Is there a margin bar or a ROIC target what determines that decision-making process?

Matthew Murphy

Yes. I mean look, you would expect we have a very thorough and sophisticated suite of financial metrics, right, that we bounce quite frankly, all of our investments against and they would be traditional financial metrics as well as some specific Marvell internal ones. But in the end, we do try to make a judgment call on risk on – are we really delivering the value on the project or not? I mean, can we really bring the best of Marvell? Or is it more of a job shop type of thing that maybe won’t go anywhere. I try to – we try to triangulate from an executive standpoint, what’s the seriousness of it. It’s not really a factor anymore, but geopolitics played a role over the last couple of years in terms of geographically, which projects you might want to take or not.

We ended up indexing and basically focusing on the North America customer base and not internationally, I think that was a good call given a lot of the export control tightening that’s happened. So that was a conscious decision as an example. We could have done some of those projects. It turns out we’re glad we didn’t just because that would have been out of our control. So we do think about those things. And I would have never thought as a CEO that I took this job eight years ago that like geopolitics was going to be a factor and like which project I do or not. I mean it was just incomprehensible even four or five years ago, but that is another factor.

But look, in the end, these projects – and we want to make sure at the end that these projects are like mission-critical for our customers. And so having that executive buy in all the way that it’s not a sideshow or a science project, and I think all that’s gone. I mean it’s too serious now. You can’t just experiment anymore. You’ve got to go make it happen. And so yes, we feel really good about the position we’ve got at the moment for now.

Toshiya Hari

Maybe shifting gears a little bit. On the interconnect side of the business, you’ve got a really strong market position across the back end, the front end, DCI as well. In your long-term model, you’re assuming a CAGR of 27% for the interconnect TAM, you’re assuming flat market share off a high base. Any specific product groups or opportunities that you and your team are particularly kind of excited about and investing in? Or is it across the board?

Matthew Murphy

Yes. Well, look, I’d say that in each of the areas, we’ve got very dedicated teams that are driving really a best-in-class road map in execution. So certainly, the PAM team and optical DSP team have done like an amazing job in terms of the market share we’ve been able to get. But they are absolutely driving that roadmap at the bleeding edge. The DCI team at ECOC a year-ago, basically in October, we announced 800ZR kind of way ahead of where I think the market thought it would be they’re heads down already on the next generation, right, which requires silicon photonics, coherent DSPs, complex module design. So again, we’re not just working on the next one. We’re on the one or two after. And then you sort of have these really, I think, highly leveraged call options for growth where we’ve taken that same PAM technology, and we’ve leveraged it for AECs, right, which was really an emerging market that started a few years ago. It’s very much a real market now.

We’re seeing use cases for that, that we hadn’t even comprehended. And again, with the state-of-the-art AECs, those have all moved to PAM-based modulation, right? So that’s sort of a leverage point for Marvell. And so we are now ramping those products into production. That’s going to be a very large market. We have a very good competitive position there. Same with PCIe on the retimer side, again, highly leveraged from our PAM investments already. So from a connectivity standpoint, we just have just a very, very broad offering with a lot of shots on goal, both defending our position, where we have product leadership, but it’s very competitive and then trying to drive a lot of innovation in these new categories and even things that we haven’t even talked about yet that are coming.

And I think connectivity has become, quite frankly, one of the leading drivers of kind of how these data centers are architected and how these chip architectures end up manifesting themselves. It used to just be do you have the nanometers. And then by the way, what’s the bolt-on an I/O. And quite frankly, now it’s not that the nanometers are trivial. But if you don’t have the best-in-class IO and interface roadmap and be able to execute that is very, very complex technology at very vying speeds now it always doesn’t matter if you have the big digital monster chip, if you can’t actually get all the IO to work. So that strategically as a technology point for us, has become very relevant. Our customers all know that. And it provides just this very large TAM that like is growing 27% a year to a very large number. Really, really pleased with the positioning there.

Toshiya Hari

Great. To your point, Matt, the optical DSP team has executed really well, home run acquisition. I’m sure you get this question a lot from investors as well, but the competitive landscape is – again, as of now, you guys are very strong. There are concerns out there in terms of market share from a technology disruption standpoint. How are you guys thinking about things like co-package optics LROs, the others that are working on optical DSPs to disrupt your position?

Matthew Murphy

Yes. Yes. Well, certainly, we’re going to stay very hungry and very paranoid, okay? We’re never going to take this position we have for granted. I think we’re addressing it in a couple of different ways. The first is, as I alluded to, kind of on the core plugable DSP roadmap, we’re just heads down to execute faster, better in time with the best technology over everybody. That team is just off to the races on that one. And that’s ultimately, especially in a high cadence, high beat rate type of market, you really need that time to market. It’s like just mission-critical. So that solves a lot of problems from a competitive standpoint. It’s not everything, okay?

Then there are always – especially in this optical area, there’s always these technology disruptive things that are lurking that eventually manifest themselves, right? Like PAM was out there for a while. And like a bunch of companies tried and then sort of Inphi, became the winner and then we acquired them. But even that took a long time, right, to make that NRZ to PAM transition. I mean even though I was at Maxim, we had an NRZ-based optical transceiver business. I was running it, and this PAM thing was out there and I was like, “yes, it’s going to happen eventually.” And then, of course, it did.

And of course, I was gone by then. So that was my deal. But anyway, on the other technologies, we are investing in those. I mean – things like linear optics, right, or CPO or silicon photonics. I mean, we’re never saying these aren’t going to ever happen. I think what I just want to make sure is clear to the investors is the preponderance and the bulk of the market in terms of revenue shipments, where the puck is heading for the next few years, foreseeable future is going to be inpluggable.

That’s still what we see when we talk to these customers all the time. But that doesn’t mean we’re not going to invest to make sure we’re ready. So we’ll be ready if there’s LPO applications, right, where they don’t need the DSP, but they need a really good broadband analog solution, we can be there. Same thing on silicon photonics and CPO, we are shipping in volume today with silicon photonics. I mean, in all of our 100-gig COLORZ modules for DCI and now 400 gig and 800 gig at a Marvell-specific design silicon photonics pick with all the associated circuitry, external components, full module design, et cetera. So we’re not afraid of those things. I think – so I never want to come across as defensive.

I think we’re just trying to be objective of saying like where is the market going to be and where is the bulk of the revenue going to be? It’s going to be inpluggable optics for sure. But it doesn’t mean we’re pooling other things or we’re going to not put – we’re going to put our head in the sand. So we intend to have the most broad suite and complete portfolio for this interconnect opportunity, the one that’s growing at 27%. And if one of those things hits in some application because it’s ready in time or it actually works, then we fully intend to be there. We’re not taking that stuff off the table.

Toshiya Hari

Okay. Very clear. Maybe a question on Innovium and sort of the data center Ethernet switch opportunity. Here, you’re more of a challenger, if you will. I think you’re in production with your 51.2T product. Maybe spend a couple of minutes on the growth opportunity here, again, in data center. And what’s your value prop relative to the competition?

Matthew Murphy

Yes. Well, Yes, we – as you mentioned, we got into this business, this higher layer switching for cloud applications and AI through the acquisition of Innovium, which was a venture-backed startup that we acquired. Marvell had a switch and has a switch business that actually came from an acquisition Marvell did in 2000. Some of you guys were around back then. And remember Galileo, which at the time, the whole market – there was no cloud, right? So the market was really for enterprise and carrier class switching applications. Very strong team, very successful.

When I became CEO in 2016, they were pitching me on, “hey, we want to go do a higher speed cloud-based switching.” And the effort internally always looked to sort of insurmountable given the strength of the competitor and the cadence they were on. And so we made the decision kind of post Inphi almost in conjunction that having the custom ASIC, the interconnect and the higher layer switching was going to be kind of a key set of technologies that would be very important and strategically relevant with the switching one being farther behind, obviously.

And so we acquired Innovium, we got a great team. We introduced our first product with them this year. It’s the 51.2T product. We took our time to get it right and we moved it all the Marvell technology. So it was done on our design flow Marvell SerDes, was done with our, I think, very thorough advanced verification techniques and suite of things that we do. And the chip worked right out the chute, and it’s now going into production this year. And there’s a lot of interest in it. We’re a challenger for sure.

But what’s happening is, I think, the whole higher layer switching market, as you’ve heard kind of from everybody, is definitely opening up in a different way because the AI use cases are somewhat different. There’s new feature sets that need to be added. So it’s not like you need to do one monolithic chip every four years and then just see who can get the chip out. So I think there’s going to be a wide variety of opportunities there. We have strong customer interest. We have a large formidable competitor in that area. So we’ve got to go earn our way in.

And it’s going to take a little bit of time, but we’re absolutely focused on this area and have a very strong roadmap general manager to run it, and we’ve actually taken the whole Marvell team and combined it with the Innovium team and that – the resources of that combined group now, which is a lot of engineers, are really focused almost primarily in this area. So we’re investing here, big time, and we’re – and we think it’s very complementary with our optics business and again, kind of that system level view with the ASIC as well.

Toshiya Hari

Great. Maybe one last question on the data center business. Perhaps on the non-AI side, in storage. That business went through a fairly extended correction. It’s been on a nice growth path or a recovery path over the past couple of quarters. Enterprise is a senior in ACD, customers sound fairly constructive at this point. What are you seeing in that business? And what are your expectations going forward?

Matthew Murphy

Yes. We’ve seen a nice recovery in that business. It was one of the first businesses at Marvell to downturn in the economic cycle which always happens, by the way. It seems like storage always kind of volunteers to go first for us for some reason, but they went first. They corrected at the beginning of calendar 2023 pretty severely. And that business now really for the last probably six quarters or so, has actually in a very kind of steady and somewhat programmatic way, just kind of grow. And what we said was, look, normalized that data center storage business for Marvell was about $200 million a quarter.

It definitely overshot during the pandemic and the supply overhype and everybody being worried. But if you just sort of said normalized, our view was like $200 million a quarter, it’s definitely on its way back up. And it’s pretty much growing, like I said, every quarter for six quarters. And sometime next year, I don’t know when we’re not saying exactly it’s going to get there. It’s going to get there. And those trends we’re hearing are great because they do sound constructive. And certainly, if that continues to strengthen, that’s great. And if we can go do better than the $200 million a quarter, that would be even better. But I think for modeling purposes and just the way to think about it is it’s on its way back up. Inventory is being digested, new things are ramping up. And our bottoms-up shows we’re on our way.

Toshiya Hari

Got it. Okay. On Enterprise Networking and carrier infrastructure, I hate to lump them together. But in the interest of time, I will – good to see the stabilization. I know you’ve shared sort of normal steady state revenue levels for both businesses. But what are your thoughts going forward? When do we get there for both businesses, you think?

Matthew Murphy

Yes. Yes. So we lump them together just to try to make it easy for investors as this is coming out of its cyclical correction. But basically – so the good news is that the first half of this year, which we thought was really going to be the bottom and quite frankly, had to be the bottom with how much those businesses had corrected. The good news is we signaled Q3 up mid-single digits for carrier and enterprise combined, which is nice and healthy and it’s good to see it coming off the bottom.

Q4, we’ve already got backlog building and orders have really picked up so that the growth rate from Q3 to Q4, we try to be helpful to investors on this because, to your point, people are wondering what’s the slope back up. That will be better than mid-single. So that will actually accelerate. So that’s even more positive. And then I think it’s going to keep chunking away.

But to your point about they’re different markets for different reasons. I think the enterprise one is more of a just balance sheet drawdown by our end customers, the channel inventory clearing, whatever it needs to clear out with the customer base and then that will just kind of recover. And the commentary is pretty constructive, I think, out of the OEMs in terms of the end market looking better. So I think that one is going to have its path. The carrier one, definitely CapEx in that area has been depressed. Now, that being said, inventory is being burned through and we have some new content on the wireless side that’s going to roll in, really starting in Q4, and we have those orders now. And we have that backlog, and that’s going to roll into next year.

So for kind of two different reasons. One is more market just normalization. One is maybe assume the market stays weak, but we have our own kind of goodness coming. That’s what gives us confidence that it’s coming back. And then to the extent that everything finally clears and we have a better economy and people are spending money on this sort of thing. Great. Maybe that’s going to be upside to the sort of $1 billion each that we talked about.

But the good news for investors, if you can wrap your head around the fact that this is the slope and we’re right, then basically, there’s about another $1 billion that at some point of annual revenue that’s going to flow back into Marvell because right now, these are at about the $1 billion kind of run rate today as of this time. And we’re not going to have to put a lot in to go get that. That’s just more business that is going to back, needs to come back.

Toshiya Hari

Right.

Matthew Murphy

So that’s – sometimes your headwind always becomes a tailwind at some point, assuming it comes back.

Toshiya Hari

Of course. Sounds good. Great. On gross margin, you’re guiding October to 61%. I think you guys and Willem have talked about over the next couple of quarters, sort of expect that sort of range. There’s a long-term target out there, 64% to 66%. Is that still the right kind of relevant target? Or just given how mix is evolving, we should think of 61% plus or minus?

Matthew Murphy

Yes. I’ll start and I’ll ask Ashish add after. But look, I think what we said on the call and Willem said, too, is probably hangs out in the ZIP code for a couple of quarters, which I think in a way is kind of a win in that you’ve got custom ramping really strongly through this period, right? But you’ve got some of the other businesses coming back to and on higher volume, that’s a helper, right, in terms of just the absorption being spread over a larger revenue base. The long-term target, we’re not ready to kind of adjust that yet for a couple of reasons.

The first is we’re still in a cyclical recovery on things like storage, enterprise carriers. So we don’t really know where that’s exactly going to come back to. That’s in the future. The second is we don’t know how big the custom is going to be. What if they’re really, really upsides what is that going to do to the mix? So how do you sort of take one off the table or not?

And then depending on the revenue scale we get, though, you’re also going to have, if you’re really upside, you’re going to have a lot of revenue that’s then going to really make your manufacturing overhead absorption look even better, right? And so there’s a lot of factors, so it’s not like we’re trying to be cute. It’s just we don’t know enough yet. So why – and these are long-term targets we set. I think the main punchline independent of the gross margin percent because that’s really mix dependent at this point. It’s really based on this custom thing.

Second driver would be sort of the core business coming back and the third, probably the absorption thing. But regardless of all that, when we look out to next year and we look at our plan, because of the outsized sort of leverage we get on the business that’s rolling in next year, particularly on custom, the OM line, we feel really good about right? Because there’s tremendous fall-through as we get this revenue growth for next year.

We don’t have to spend to keep up with it. There’s NRE that’s coming in the door because of these custom programs and the OpEx we can control, right. So we actually have a view on that. We’ve been going through our whole capital allocation, what we’re going to spend. So that’s a knob. The topline looks really good. And so if the GM moves around a little bit, I still feel very good about where the OM is, and that’s really what we’re driving for next year is that 38% to 40% target, like how do we get there?

How do we get there as fast as we can, how do we sustain it there. And then we’ll adjust around it, right? If GMs are up a little bit, we can pull a knob, GMs are down a little bit. Probably means we have more EPS, to be honest. It’s a little bit of a weird thing, but the lower the Marvell gross margin goes in some ways, it probably means there’s a big fall through because the core business margins are holding very strong and are very consistent, right?

So I think net-net, we would use like a future Investor Day, whenever we would do that again to probably say, okay, let’s take stock. Let’s articulate the future. Let’s look at the OEM, the GM in concert and the growth rate, and that’s how we would think about it.

Toshiya Hari

Makes sense. Maybe in the last minute on capital return and M&A as part of that. You’ve obviously been quite acquisitive since joining the company, a ton of very good acquisitions. Do you feel like you’ve got the right portfolio, the right assets in place to pursue the long-term objectives? And if you feel like M&A is still an option, what would you look for. And from a buyback perspective, what should investors expect?

Matthew Murphy

Okay. Yes, real quick. So yes, we did a lot. We did a lot of – but we do a lot of M&A, we do a lot of divestitures, a lot of churn organically to get where we got to because we had to. I was not handed a beautiful gifts like in terms of like, “Hey, awesome, you got this whole portfolio, Matt, of all this killer stuff for like the future. So just go run with it.” We had to make this happen. We had a bootstrap this company from a basically sub-$3 billion enterprise value at some point to where it is today. And so we had to go chop all this wood, take all this risk, do all this stuff. But I said in 2021, look, we did what we had to do.

We got the portfolio we want. And by the way, given the regulatory environment, I’m thinking there’s – this M&A is going to get really hard going forward, we got to control our own destiny. So our organic investments are really paying off. We’ve focused on the internal stuff, so we can fund our future. And we’re enjoying the benefits of not having done a bunch of M&A recently.

Like, to your point, we’re buying back stock. We’re buying back a bunch. The Board and I did a $3 billion authorization, right? Just fairly recently. Willem’s articulated that we’ve been increasing our buyback every quarter. We actually said we’re going to take share count down in Q3, which would be fantastic.

And the P&L looks much cleaner because a lot of the stuff that happens when you do M&A is starting to finally roll its way through, and we’re generating a lot of free cash flow and able to really fund our future. So we have a very strong organic plan, we believe it can get us to where we need to get to. We’ll always look for technology that could help accelerate that. No question.

And if we had to do another M&A, we’re actually good at it. We know how to go like, do this stuff, but what’s actually actionable, what makes sense? That’s all these question marks and there’s not more in Inphis and Caviums and Innoviums and stuff floating around. So we’ve kind of had that recognition like three, four years ago. And we really like how we’re positioned now with the investments we’ve got. And so yes, we expect on the buyback, we’re going to keep going because we have conviction in our future.

Toshiya Hari

Great. Unfortunately, we’re out of time. Thank you so much for coming and…

Matthew Murphy

You’re welcome. Thanks for hosting me. Appreciate it. Thanks everybody.

Toshiya Hari

Thank you, everybody.

Matthew Murphy

Bye.