Marvell Technology Group (MRVL)

Because we expect to experience lower sequential growth rates in future periods, investors should not rely on our historical growth rates when evaluating our business.

For the past four years, we have been able to report significant sequential quarterly growth in revenues; however, our revenues have grown at a slower sequential rate in the past seven sequential quarters ending with the first quarter of fiscal 2007 compared to the double digit sequential growth rate of the previous eleven quarters. This slower growth rate is due, among other things, to the larger base of revenue and market share we now enjoy, which makes continuation of double digit revenue growth on a sequential quarterly basis unlikely in the current market. However, due to our recent acquisitions, the growth in our revenues is attributable to a combination of both organic growth and growth from our acquisitions. Accordingly, investors should not rely on the results of any prior quarterly or annual periods as an indication of our future performance.

The implementation of new accounting rules related to the expensing of stock-based awards adversely affected our reported results of operations for first quarter of fiscal 2007 and will continue to negatively impact our operating results in subsequent periods. Any subsequent changes in accounting rules may also have an adverse effect on our results of operations.

Effective February 1, 2006, we adopted Statement of Financial Accounting Standards no. 123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R requires all share-based payment awards to employees, including grants of employee stock options, to be recognized in the financial statements based on their grant date fair values and does not allow the previously permitted pro forma disclosure-only method as an alternative to financial statement recognition.

The adoption of SFAS 123R has a significant adverse impact on our reported results of operations because the stock-based compensation expense is charged directly against our reported earnings. Our net income for the three months ended April 30, 2006 reflected stock-based compensation expense of $44.5 million as a result of our adoption of SFAS 123R. The amount of unearned stock-based compensation currently estimated to be expensed in the period commencing May 1, 2006 through April 30, 2011 related to unvested share-based payment awards at April 30, 2006 is $376.8 million. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards to employees or assume unvested equity awards in connection with acquisitions.

We also plan to grant additional employee stock options as well as restricted stock units in the second quarter of fiscal 2007 as part of our compensation plan. The unearned stock-based compensation resulting from those stock options and restricted stock unit grants will depend on the number of stock options and restricted stock units granted and their then current fair values.

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Had we adopted SFAS 123R in prior periods, the magnitude of the impact of that standard on our results of operations would have approximated the impact of SFAS 123 assuming the application of the Black-Scholes option pricing model as described in the disclosure of pro forma net income (loss) and pro forma net income (loss) per share in Notes 1 and 7 of Notes to Unaudited Condensed Consolidated Financial Statements. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement may reduce net operating cash flows and increase net financing cash flows in periods after its adoption.

Any other subsequent changes in the accounting rules applicable to us may also have an adverse effect on our results of operations.

Because we expect to experience lower sequential growth rates in future periods, investors should not rely on our historical growth rates when evaluating our business.

For the past four years, we have been able to report significant sequential quarterly growth in revenues; however, our revenues have grown at a slower sequential rate in the past six sequential quarters ending with the fourth quarter of fiscal 2006 compared to the double digit sequential growth rate of the previous eleven quarters. This slower growth rate is due, among other things, to the larger base of revenue and market share we now enjoy, which makes continuation of double digit revenue growth on a sequential quarterly basis unlikely in the current market. Accordingly, investors should not rely on the results of any prior quarterly or annual periods as an indication of our future performance.

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