Marvell Technology Group (MRVL)

Note 12. Income Taxes

For the three months ended May 2, 2009 and May 3, 2008, the Company’s effective tax rate was an income tax expense of 1.8% and 10.0%, respectively. The income tax provision for these periods was affected by non-tax-deductible expenses such as stock-based compensation expense, amortization of acquired intangibles and accrual of unrecognized tax benefits, interest and penalties associated with unrecognized tax positions. In addition, the effective tax rate for the three months ended May 2, 2009 was impacted by a pretax loss for the current quarter which required the Company to exclude losses in tax jurisdictions for which no benefit would be recognized.

The Company’s total unrecognized tax benefits as of May 2, 2009 and May 3, 2008 were $112.6 million and $114.3 million, respectively. The Company also recorded a FIN 48 liability for potential interest and penalties of $23.6 million and $10.8 million, respectively, as of May 2, 2009. For the three months ended May 2, 2009, the provision for income taxes was reduced by $4.3 million because, in several foreign jurisdictions, the statute of limitations lapsed for uncertain tax positions. If recognized, all of the FIN 48 liabilities recorded to date, except the portion attributable to the unrealized foreign exchange gains and losses, will impact the effective tax rate.

The Company conducts business globally and, as a result, one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Germany, Israel, Netherlands, Switzerland, the United Kingdom, Canada, Malaysia and the United States. The Company is subject to non-U.S. income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2006. The U.S. tax authorities are reviewing employment taxes with regard to the re-measured stock options and have proposed audit assessments for calendar years 2003 through 2006 for which the U.S. subsidiary filed a protest with regard to a portion of the assessment. The Company believes that it has adequately provided for all issues related to these examinations, and the ultimate disposition of these matters is unlikely to have a material adverse affect on the Company’s consolidated financial position.

Note 12. Income Taxes

For the three months ended November 1, 2008 and October 27, 2007, the Company’s effective tax rate was an income tax expense of 15.9% and an income tax benefit of 59.4%, respectively.  The income tax provision recorded for the three months ended November 1, 2008 was $13.4 million and the income tax benefit recorded for the three months ended October 27, 2007 was $9.4 million. The income tax provision for these periods was affected by non-tax-deductible expenses such as stock-based compensation expense, amortization of acquired intangibles and accrual of unrecognized tax benefits, interest and penalties associated with FIN 48.  In addition, the November 1, 2008 income tax expense was increased by a California budget trailer bill (A.B. 1452) signed into law on September 30, 2008, adjusting the income tax provision for prior interim reporting periods due to changes in the economic forecast, and truing-up the fiscal 2008 U.S. federal income tax return to the fiscal 2008 income tax provision.  The fiscal 2007 income tax benefit was affected by closure of a non-U.S. audit and the release of income tax reserves.

The Company’s total unrecognized tax benefits as of November 1, 2008 and February 2, 2008 were $112.8 million and $109.6 million, respectively.  During the three months ended November 1, 2008, there was a net $5.6 million decrease in cumulative foreign exchange related to foreign tax reserves partially offset by unrecognized tax benefits, penalties and interest. During the nine months ended November 1, 2008, there was a net $3.2 million increase in unrecognized tax benefits, penalties and interest partially offset by cumulative foreign exchange related to foreign tax reserves.  If recognized, all of the FIN 48 liabilities recorded to date will impact the effective tax rate.

In accordance with the Company’s accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax provision. This policy did not change as a result of the adoption of FIN 48.  In previous periods, the Company had recorded unrealized foreign exchange gains and losses related to uncertain tax positions in its provision (benefit) for income taxes line item in the income statement.  In the third quarter of fiscal 2009, the Company began presenting this amount in interest and other income, net.  During the three months ended November 1, 2008, foreign exchange gains on uncertain tax positions were $11.5 million included in interest and other income, net.  As these amounts were in included in the provision (benefit) for income taxes in previous periods, in order to conform the comparative amounts to the current presentation, during the three months ended October 27, 2007, the Company reclassified $3.4 million of foreign exchange losses related to uncertain tax positions from provision (benefit) for income taxes to other income, net.  During the nine months ended November 1, 2008, the Company reclassified $12.7 million of foreign exchange gains and during the nine months ended October 27, 2007, the Company reclassified $5.8 million of foreign exchange losses related to uncertain tax positions from income tax expense to other income, net.

The Company conducts business globally and, as a result, one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Germany, Israel, Netherlands, Switzerland, the United Kingdom, Canada, Malaysia and the United States.  The Company is subject to non-U.S. income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2004.  During the three months ended November 1, 2008, non-U.S. subsidiaries and U.S. subsidiaries were notified by federal and state tax authorities that they would begin an income tax audit for fiscal years 2004 through 2007.  The audit field work by U.S. tax authorities of the Company’s U.S. subsidiaries is complete for the fiscal years 2004 through 2006; however, there is no closing agreement.  The U.S. tax authorities are reviewing employment taxes with regard to the re-measured stock options and have proposed audit assessments for calendar years 2003 through 2006.  During the three months ended November 1, 2008, the U.S. subsidiary filed a protest with regard to a portion of the assessment.  The Company believes that it has adequately provided for all issues related to these examinations, and the ultimate disposition of these matters is unlikely to have a material adverse affect the Company’s consolidated financial position.

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Note 10. Income Taxes

For the three months ended August 2, 2008 and July 28, 2007, the Company’s effective tax rate was an income tax expense of 6.6% and an income tax expense of (20.5)%, respectively.  The income tax provision for these periods was affected by non-tax-deductible expenses such as SFAS 123R stock-based compensation expense, amortization of acquired intangibles, foreign exchange adjustments, and accrual of unrecognized tax benefits, interest and penalties associated with FIN 48.  In addition, the August 2, 2008 income tax expense was also affected by the Housing and Economic Recovery Act of 2008 (P.L. 110-289) signed into law July 30, 2008.

The Company’s total unrecognized tax benefits as of August 2, 2008 and February 2, 2008 were $118.3 million and $109.7 million, respectively. During the three months ended August 2, 2008, there was a reversal of a FIN 48 reserve due to the lapse of a statute of limitations in the amount of $1.4 million which includes penalty and interest.  However, overall there was a net $8.6 million increase in unrecognized tax benefits, penalties and interest during the six months ended August 2, 2008.  The net increase was primarily due to uncertain tax positions on our international structure.  If recognized, all of the FIN 48 liabilities recorded to date will impact the effective tax rate.

In accordance with the Company’s accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax provision. This policy did not change as a result of the adoption of FIN 48.

The Company conducts business globally and, as a result, one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Germany, Israel, Netherlands, Switzerland, the United Kingdom, Canada, Malaysia and the United States.  The Company is subject to non U.S. income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2004.  During the quarter ended May 3, 2008, non U.S. subsidiaries were notified by tax authorities that they would begin an income tax audit for fiscal years 2004, 2005 and 2006. The audit field work was completed after the quarter ended May 3, 2008, concluding that no adjustments were necessary to the 2004, 2005 and 2006 years. The audit also covered the employment taxes with regard to the re-measured stock options, and the taxing authorities found that the employment taxes were adequately provided.  The audit field work by U.S. tax authorities of the Company’s U.S. subsidiaries is complete for the fiscal years 2004, 2005 and 2006, however, there is no closing agreement.  The U.S. tax authorities are reviewing employment taxes with regard to the re-measured stock options and have proposed audit assessments for calendar years 2003, 2004, 2005 and 2006.  The Company believes that it has adequately provided for all issues related to these examinations, and the ultimate disposition of these matters is unlikely to have a material adverse affect the Company’s consolidated financial position.

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Note 10. Income Taxes

For the three months ended May 3, 2008 and April 28, 2007, the Company’s effective tax rate was an income tax expense of 10.9% and an income tax expense of (12.7)%, respectively.  The income tax provision for these periods was affected by non-tax-deductible expenses such as SFAS 123R stock-based compensation expense, amortization of acquired intangibles and accrual of unrecognized tax benefits, interest and penalties associated with FIN 48.

Our total unrecognized tax benefits as of May 3, 2008 and February 2, 2008 were $114.3 million and $109.7 million, respectively. During the three months ended May 3, 2008, there was a reversal of a FIN 48 reserve due to the lapse of a statute of limitations in the amount of $0.8 million which includes penalty and interest.  However, overall there was a net $4.6 million increase in unrecognized tax benefits, penalties and interest during the three months ended May 3, 2008.  The net increase was primarily due to uncertain tax positions on our international structure.  If recognized, all of the FIN 48 liabilities recorded as of the date of adoption will impact the effective tax rate.

In accordance with the Company’s accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax provision. This policy did not change as a result of the adoption of FIN 48.

The Company conducts business globally and, as a result, one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Germany, Israel, Netherlands, Switzerland, the United Kingdom, Canada, Malaysia, and the United States.  The Company is subject to foreign income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2004.  The U.S. subsidiaries are currently under audit by the U.S. tax authorities for the fiscal years 2004, 2005 and 2006, which audit work is completed and the results are currently under review by the IRS national office.  The U.S. tax authorities are also reviewing employment taxes with regard to the re-measured stock options.  During the three months ended May 3, 2008, one of the Company’s foreign subsidiaries was notified by tax authorities that it would begin an income tax audit for fiscal years 2004, 2005 and 2006. The audit field work was completed just after May 3, 2008, with no adjustments to the 2004, 2005 and 2006 years as filed. The audit also covered the employment taxes with regard to the re-measured stock options, and the taxing authorities found that the employment taxes had been adequately provided.  The Company believes that it has adequately provided for all issues related to these examinations and the ultimate disposition of these matters is unlikely to have a material adverse affect on our consolidated financial position.

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Note 9. Income Taxes

For the three months ended October 27, 2007 and October 28, 2006, the Company’s effective tax rate was an income tax benefit of 48.5% and an income tax expense of 51.7%, respectively.  For the nine months ended October 27, 2007 and October 28, 2006, the Company’s effective tax rate was an income tax expense of 9.0% and 22.4%, respectively.  The income tax provision for these periods was affected by non-tax-deductible expenses such as SFAS 123R stock-based compensation expense, as well as the accrual of liabilities, interest and penalties associated with unrecognized benefits.

During the three months ended October 27, 2007, the Company recorded a benefit of $15.4 million arising from the reversal of certain reserves including penalties upon the completion of a foreign tax audit, which resulted in a benefit for the three month period ended October 27, 2007 and reduced the Company’s income tax provision for the nine months ended October 27, 2007.  Offsetting the decrease in the effective tax rate for the three and nine months ended October 27, 2007 was the fact that a smaller proportion of profit was earned in zero or lower tax jurisdictions and as well as providing income taxes on discrete items and unrecognized income tax benefits.

Effective January 28, 2007, the Company adopted the provisions of FIN 48.  The adoption of FIN 48 did not result in any reclassifications of uncertain income tax liabilities and did not have a cumulative impact to retained earnings.  As of January 28, 2007, the Company’s liabilities for unrecognized income tax benefits totaled $116.8 million which included interest and penalties of $31.5 million.  If recognized, all of the FIN 48 liabilities recorded as of the date of adoption will impact the effective tax rate.  As of October 27, 2007, the Company’s interest and penalties expense associated with FIN 48 liabilities balance was $33.1 million.

In accordance with the Company’s accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax provision. This policy did not change as a result of the adoption of FIN 48.

The Company conducts business globally and, as a result, one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Germany, Israel, Netherlands, Switzerland, the United Kingdom, and the United States.  The Company is subject to non-U.S. income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2004.  The U.S. subsidiaries are currently under audit by the U.S. tax authorities for the fiscal years 2004, 2005 and 2006.  The U.S. tax authorities are also reviewing employment taxes with regard to the re-measured stock options.  The Company has accrued for the employment taxes and believes that it has adequately provided for this liability.  The foreign tax authorities have concluded an audit of one of the Company’s foreign subsidiaries for the tax years 2005, 2006 and 2007 during the third quarter of fiscal 2008. Therefore, the Company has performed a remeasurement of tax reserves previously accrued for these years and concluded that the remaining balances are not required because the likelihood of future audit or assessment is remote.  It is possible that the amount of the liability for unrecognized income tax benefits, including the unrecognized income tax benefit positions which have been taken during the audit cycles referenced above, may change within the next 12 months.  The Company believes that it has adequately provided for any assessments.  The income tax rate will be affected as events occur, income tax audits conclude or statutes of limitations expire.  An estimate of the range of possible changes in the effective income tax rate cannot be made at this time.

Note 9. Income Taxes

The Company recorded tax expense of $9.6 million and $15.6 million for the three and six months ended July 28, 2007, compared to $12.1 million and $28.0 million for the three and six months ended July 29, 2006.  The income tax provision for these periods was affected by non-tax-deductible expenses such as SFAS 123R stock-based compensation expense, as well as the accrual of liabilities, interest and penalties associated with unrecognized benefits.  During the three months ended July 28, 2007, $1.3 million of income tax expense was recorded as a discrete item associated with a gain on the sale of an asset under construction.

The effective tax rate for the three and six months ended July 28, 2007 increased due to a smaller proportion of profits earned in zero or low tax jurisdictions during the quarter ended July 28, 2007 and due to tax on the gain associated with the sale of an asset under construction which was treated as a discrete item in the quarter.

Effective January 28, 2007, the Company adopted the provisions of FIN 48. The adoption of FIN 48 did not result in any reclassifications of uncertain income tax liabilities and did not have a cumulative impact to retained earnings.  As of January 28, 2007, the Company’s liabilities for unrecognized income tax benefits totaled $116.8 million which included interest and penalties of $31.5 million.  If recognized, all of the FIN 48 liabilities recorded as of the date of adoption will impact the effective tax rate.  For the six months ended July 28, 2007, $3.9 million of interest expense associated with FIN 48 liabilities was accrued as a component of income tax expense.

In accordance with the Company’s accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax provision. This policy did not change as a result of the adoption of FIN 48.

The Company conducts business globally and, as a result, one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Israel, Netherlands, Switzerland, the United Kingdom, and the United States.  The Company is subject to non-U.S. income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2004.  The U.S. subsidiaries are currently under audit by the U.S. tax authorities for the fiscal years 2004, 2005 and 2006.  The U.S. tax authorities are also reviewing employment taxes with regard to the re-measured stock options.  The Company has accrued for the employment taxes and believes that it has adequately provided for this liability.   The Japanese tax authorities have notified one of the Company’s Japanese subsidiaries that there will be an audit for the tax years 2005, 2006 and 2007 to begin during the third quarter of fiscal 2008.  It is possible that the amount of the liability for unrecognized income tax benefits, including the unrecognized income tax benefit positions which have been taken during the audit cycles referenced above, may change within the next 12 months.  The Company believes that it has adequately provided for any assessments.  The income tax rate will be affected as events occur and income tax audits are concluded.  An estimate of the range of possible changes in the effective income tax rate cannot be made at this time.

Note 9. Income Taxes

Effective January 28, 2007, the Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). The adoption of FIN 48 did not result in any reclassifications of uncertain tax liabilities and did not have a cumulative impact to retained earnings.  As of January 28, 2007, the Company’s liabilities for unrecognized tax benefits totaled $116.8 million which includes interest and penalties of $31.5 million.  The Company recorded an increase of its unrecognized tax benefits of approximately $3.9 million during the quarter ended April 28, 2007, which included penalties and interest of $2.4 million.  This amount is included in other long-term tax liabilities and includes penalties and interest.  The cumulative uncertain tax position balance as of April 28, 2007 is $120.7 million, if recognized, would favorably affect the Company’s effective tax rate.

In accordance with the Company’s accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. This policy did not change as a result of the adoption of FIN 48.

The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  The Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Singapore, Japan, Taiwan, China, India, Israel, Netherlands, Switzerland, the United Kingdom, and the United States.  The Company is subject to non-U.S. income tax examinations for years beginning with fiscal year 2002 and for U.S. income tax examinations beginning with fiscal year 2004.  The U.S. subsidiaries are currently under audit by the U.S. tax authorities for the fiscal years 2004, 2005 and 2006.  The U.S. tax authorities are also reviewing employment taxes with regard to the re-measured stock options.  The Company has accrued for the employment taxes and believes that it has adequately provided for this liability.  The Company does not believe that the total amount of unrecognized benefits will significantly change within the next year.