Dive Brief:
- Marvell Technology Group Ltd. will pay $5.5 million to settle charges that it misled investors when engaging in an undisclosed revenue management procedure to meet publicly issued revenue guidance, the Securities and Exchange Committee (SEC) announced Monday.
- The company orchestrated a procedure to accelerate, or "pull-in," sales to the current quarter that had been scheduled for future quarters.
- The purpose of the pull-in sales, which took place during the fourth quarter of 2015 and first quarter of 2016, was to close the gap between actual and forecasted revenue and to meet publicly issued revenue guidance, the SEC said.
Dive Insight:
The pull-ins for these quarters amounted to $24 million and $64 million of the total quarterly revenues, or 5% and 16% of revenue in its key storage segment, respectively, the SEC said.
Use of the pull-ins masked a substantial decline in customer demand, a loss of market share and reduced future sales. "Marvell ignored internal concerns that the pull-ins were obfuscating the company's deteriorating financial results," the agency said.
By failing to disclose its use of the pull-ins, Marvell misled investors in its SEC quarterly filings and in earnings calls, making positive statements regarding its fourth-quarter 2015 financial results and stating that it had met its public guidance for the first quarter of 2016.
"Investors rely on public companies to supply them with financial results they can use to make informed investment decisions," said Anita Bandy, associate director of the SEC Division of Enforcement. "Marvell's failure to disclose its use of sales pull-ins to investors created a misleading and incomplete picture about the company's financial results and ability to meet its revenue targets."
Without admitting or denying the SEC's findings that it violated anti-fraud and reporting provisions of federal securities laws, Marvell consented to the order, agreeing to cease and desist from further violations and to pay the $5.5 million penalty.
