Marvell Technology Group (MRVL)

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, including stock-based compensation, mask prototype costs, contracted development work costs, net of development fees received from customers, depreciation and amortization expense, patent investigation and filings fees and allocated occupancy costs for these operations. The decrease in research and development expense for the three months ended May 2, 2009 compared to the three months ended May 3, 2008 of $38.2 million was primarily due to lower salary and related expenses of $15.7 million as a result of lower overall headcount from cost reduction efforts. In addition, we received the benefit of $5.3 million of research and development funding from customers for development work in the three months ended May 2, 2009. Stock-based compensation decreased $8.2 million due to older options with relatively higher valuations becoming fully vested along with lower expense due to differences in the vesting schedule of replacement grants versus tendered options as a result of our option exchange program during the fourth quarter ended January 31, 2009. Other decreases in research and development expenses of approximately $8.1 million related to lower discretionary spending due to tight cost controls including evaluation boards and engineering supplies, travel and outside professional

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services. We currently expect research and development expense during the second quarter ending August 1, 2009 will moderately decline from the level of expense reported during the first quarter ended May 2, 2009 due to the effects of our continued focus on cost controls.

Research and Development

We believe that our future success depends on our ability to introduce improvements to our existing products and to develop new products that deliver cost-effective solutions for both existing and new markets. Our

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research and development efforts are directed largely to the development of high-performance analog, mixed- signal, digital signal processing and embedded microprocessor integrated circuits. We devote a significant portion of our resources to expanding our core intellectual property technology portfolio with designs that enable high-performance, reliable communications over a variety of physical transmission media. We are also focused on incorporating functions currently provided by stand-alone integrated circuits into our products to reduce our customers’ overall system costs.

We have assembled a core team of engineers who have extensive experience in the areas of mixed-signal circuit design, digital signal processing, embedded microprocessors, CMOS technology and system-level architectures. We have invested, and expect that we will continue to invest, significant funds for research and development. Our research and development expense was $930.0 million, $989.0 million and $658.2 million in fiscal 2009, 2008 and 2007, respectively.

Research and Development

We believe that our future success depends on our ability to introduce improvements to our existing products and to develop new products that deliver cost-effective solutions for both existing and new markets. Our

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research and development efforts are directed largely to the development of high-performance analog, mixed- signal, digital signal processing and embedded microprocessor integrated circuits. We devote a significant portion of our resources to expanding our core intellectual property technology portfolio with designs that enable high-performance, reliable communications over a variety of physical transmission media. We are also focused on incorporating functions currently provided by stand-alone integrated circuits into our products to reduce our customers’ overall system costs.

We have assembled a core team of engineers who have extensive experience in the areas of mixed-signal circuit design, digital signal processing, embedded microprocessors, CMOS technology and system-level architectures. We have invested, and expect that we will continue to invest, significant funds for research and development. Our research and development expense was $930.0 million, $989.0 million and $658.2 million in fiscal 2009, 2008 and 2007, respectively.

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, prototype costs, depreciation and amortization expense, patent investigation and filing fees, costs associated with contract development work and allocated occupancy costs for these operations. Research and development expense decreased by $59.0 million in fiscal 2009 as compared to fiscal 2008

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primarily due to a decrease in stock-based compensation of $25.4 million as recent awards have a lower valuation due to the depressed stock price along with the reversal of expenses for performance related grants due to the unlikely nature of the achievement of the specific performance targets due to the poor economic conditions. In addition, salary and related costs decreased $10.7 million due primarily to lower bonus expenses due to the cancellation of the fiscal 2009 bonus plan in response to the challenging economic times along with the benefits of our calendar year end shutdown, partially offset by selective headcount additions. Non-recurring engineering, pre-production and development wafer costs decreased $10.6 million as a result of tight cost controls partially offset by higher photomask spending earlier in the year for key new products. We also received a $5.0 million benefit from the reversal of remaining payroll tax liabilities due to the completion of our 409A reimbursement program. Other decreases in research and development expenses included a $3.6 million decrease in evaluation boards and engineering supplies, a $3.6 million decrease in travel related costs, a $3.3 million decrease in temporary help and consulting costs, $2.4 million decrease in patent legal fees and a $3.3 million decrease in other research and development primarily driven by cost control efforts. Partially offsetting the decreases in research and development expenses was $1.5 million of lower allocations of research and development spending to manufacturing activities. We expect that research and development costs in fiscal 2010 will moderately decline from the level of expense reported in fiscal 2009 due to continued focus on cost controls and the impacts of our restructuring plans.

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, prototype costs, depreciation and amortization expense, patent investigation and filing fees, costs associated with contract development work and allocated occupancy costs for these operations. Research and development expense decreased by $59.0 million in fiscal 2009 as compared to fiscal 2008

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primarily due to a decrease in stock-based compensation of $25.4 million as recent awards have a lower valuation due to the depressed stock price along with the reversal of expenses for performance related grants due to the unlikely nature of the achievement of the specific performance targets due to the poor economic conditions. In addition, salary and related costs decreased $10.7 million due primarily to lower bonus expenses due to the cancellation of the fiscal 2009 bonus plan in response to the challenging economic times along with the benefits of our calendar year end shutdown, partially offset by selective headcount additions. Non-recurring engineering, pre-production and development wafer costs decreased $10.6 million as a result of tight cost controls partially offset by higher photomask spending earlier in the year for key new products. We also received a $5.0 million benefit from the reversal of remaining payroll tax liabilities due to the completion of our 409A reimbursement program. Other decreases in research and development expenses included a $3.6 million decrease in evaluation boards and engineering supplies, a $3.6 million decrease in travel related costs, a $3.3 million decrease in temporary help and consulting costs, $2.4 million decrease in patent legal fees and a $3.3 million decrease in other research and development primarily driven by cost control efforts. Partially offsetting the decreases in research and development expenses was $1.5 million of lower allocations of research and development spending to manufacturing activities. We expect that research and development costs in fiscal 2010 will moderately decline from the level of expense reported in fiscal 2009 due to continued focus on cost controls and the impacts of our restructuring plans.

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, stock-based compensation expenses, prototype costs, depreciation and amortization expense, patent investigation and filing fees, costs associated with contract development work and allocated occupancy costs for these operations. The increase in research and development expense in absolute dollars of $330.8 million in fiscal 2008 compared to fiscal 2007 was primarily due to additional development personnel to support the growth of our business as well as additional personnel related to our acquisitions of the ICAP Business in November 2006 and the printer semiconductor business acquired from Avago in May 2006 which together resulted in an increase in salary and related costs of $161.4 million. In addition, research and

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development costs increased due to additional stock-based compensation expenses of $30.8 million. Additionally, we incurred increased depreciation and amortization expense of $48.1 million arising from purchases of property, equipment and technology licenses, increased costs of $19.2 million for prototype and related product tape-out costs for new product initiatives, increased costs of $7.0 million for tooling and engineering equipment expenses, increased costs of $5.4 million for patent filing fees to protect newly developed intellectual property and other allocated expenses of $29.8 million related to our expanding operations.

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, stock-based compensation expenses, prototype costs, depreciation and amortization expense, patent investigation and filing fees, costs associated with contract development work and allocated occupancy costs for these operations. The increase in research and development expense in absolute dollars of $330.8 million in fiscal 2008 compared to fiscal 2007 was primarily due to additional development personnel to support the growth of our business as well as additional personnel related to our acquisitions of the ICAP Business in November 2006 and the printer semiconductor business acquired from Avago in May 2006 which together resulted in an increase in salary and related costs of $161.4 million. In addition, research and

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development costs increased due to additional stock-based compensation expenses of $30.8 million. Additionally, we incurred increased depreciation and amortization expense of $48.1 million arising from purchases of property, equipment and technology licenses, increased costs of $19.2 million for prototype and related product tape-out costs for new product initiatives, increased costs of $7.0 million for tooling and engineering equipment expenses, increased costs of $5.4 million for patent filing fees to protect newly developed intellectual property and other allocated expenses of $29.8 million related to our expanding operations.

Research and Development

        We believe that our future success depends on our ability to introduce improvements to our existing products and to develop new products that deliver cost-effective solutions for both existing and new markets. Our research and development efforts are directed largely to the development of high-performance analog, mixed-signal, digital signal processing and embedded microprocessor integrated circuits. We devote a significant portion of our resources to expanding our core intellectual property (IP) technology library with designs that enable high-performance, reliable communications over a variety of physical transmission media. We are also focused on incorporating functions currently provided by stand-alone integrated circuits into our products to reduce our customers' overall system costs.

        We have assembled a core team of engineers who have extensive experience in the areas of mixed-signal circuit design, digital signal processing, embedded microprocessors, CMOS technology and system-level architectures. As of February 2, 2008, we had 3,753 employees in engineering and process development. We have invested, and expect that we will continue to invest, significant funds for research and development. Our research and development expense was approximately $970.8 million in fiscal 2008, $645.4 million in fiscal 2007 and $360.0 million in fiscal 2006.

Research and Development

        We believe that our future success depends on our ability to introduce improvements to our existing products and to develop new products that deliver
cost-effective solutions for both existing and new markets. Our research and development efforts are directed largely to the development of high-performance analog,
mixed-signal, digital signal processing and embedded microprocessor integrated circuits. We devote a significant portion of our resources to expanding our core intellectual property (IP)
technology library with designs that enable high-performance, reliable communications over a variety of physical transmission media. We are also focused on incorporating functions
currently provided by stand-alone integrated circuits into our products to reduce our customers' overall system costs.

        We
have assembled a core team of engineers who have extensive experience in the areas of mixed-signal circuit design, digital signal processing, embedded microprocessors,
CMOS technology and system-level architectures. As of February 2, 2008, we had 3,753 employees in engineering and process development. We have invested, and expect that we will
continue
to invest, significant funds for research and development. Our research and development expense was approximately $970.8 million in fiscal 2008, $645.4 million in fiscal 2007 and
$360.0 million in fiscal 2006.

Research and Development

We believe that our future success depends on our ability to introduce improvements to our existing products and to develop new products that deliver cost-effective solutions for both existing and new markets. Our research and development efforts are directed largely to the development of high-performance analog, mixed-signal, digital signal processing and embedded microprocessor integrated circuits. We devote a significant portion of our resources to expanding our core technology library with designs that enable high-performance, reliable communications over a variety of physical transmission media. We are also focused on incorporating functions currently provided by stand-alone integrated circuits into our products to reduce our customers’ overall system costs.

We have assembled a core team of engineers who have extensive experience in the areas of mixed-signal circuit design, digital signal processing, embedded microprocessors, CMOS technology and system-level architectures. As of January 27, 2007, we had 3,706 employees in engineering and process development. We have invested, and expect that we will continue to invest, significant funds for research and development. Our research and development expense was approximately $654.4 million in fiscal 2007, $360.0 million in fiscal 2006 and $299.9 million in fiscal 2005.

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Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, including stock-based compensation expenses, prototype costs, depreciation and amortization expense, and allocated occupancy costs for these operations. The increase in research and development expense in absolute dollars in the first quarter of fiscal 2007 compared to the first quarter of fiscal 2006 was primarily due to stock-based compensation expenses of $27.5 million as a result of our adoption of SFAS 123R. In addition, research and development expenses increased due to the net hiring of additional development personnel including personnel related to our acquisitions of the hard disk and tape drive controller business of QLogic Corporation in November 2005 and the semiconductor division of UTStarcom, Inc. in February 2006, which resulted in an increase in salary and related costs of $16.4 million. Additionally, we incurred increased costs for depreciation and amortization expense of $1.3 million arising from purchases of property, equipment and technology licenses, increased costs of $1.2 million for prototype and related product tape-out costs for new product initiatives, increased costs of $1.2 million for patent filing fees to protect newly developed intellectual property and other allocated expenses of $2.6 million related to our expanding operations.

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We expect that research and development expense will increase in absolute dollars in future periods as we continue to devote resources to develop new products, migrate to lower process geometries, meet the changing requirements of our customers, expand into new markets and technologies and hire additional personnel, including those from our acquisitions.

Research and Development

The increase in research and development expense in absolute dollars in fiscal 2005 compared to fiscal 2004 was primarily due to the net hiring of additional development personnel and a full year's impact of personnel related to our acquisitions of RADLAN in June 2003 and Asica in November 2003, which together resulted in an increase in salary and related costs of $29.0 million. Included in the increase in salary and related costs for fiscal 2005 is approximately $1.0 million of compensation expense resulting from the accelerated vesting of stock options previously granted to an employee. Additionally, we incurred increased costs of $2.2 million for prototype and related product tape-out costs for new product initiatives, increased costs of $1.2 million for outside services to assist in new product initiatives, increased cost of $2.0 million for patent filing fees to protect newly developed intellectual property, increased depreciation and amortization expense of $6.9 million arising from purchases of property, equipment and technology licenses and other allocated expenses of $5.9 million related to our expanding operations.

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, prototype costs, depreciation and amortization expense, and allocated occupancy costs for these operations. The increase in research and development expense in absolute dollars in the third quarter of fiscal 2006 compared to the third quarter of fiscal 2005 was primarily due to the net hiring of additional development personnel, which contributed to an increase in salary and related costs of $7.4 million. Additionally, we incurred increased costs for depreciation and amortization expense of $1.5 million arising from purchases of property, equipment and technology licenses, increased tooling and engineering equipment expenses of $0.8 million, increased costs of $0.4 million for patent filing fees to protect newly developed intellectual property and other allocated expenses of $3.0 million related to our expanding operations.  Offsetting the increase in research and development expense was decreased costs of $2.4 million for prototype and related product tape-out costs, primarily due to the timing and quantity of tape-outs in the comparable quarters.

The increase in research and development expense in absolute dollars in the first nine months of fiscal 2006 compared to the first nine months of fiscal 2005 was primarily due to the net hiring of additional development personnel, which contributed to an increase in salary and related costs of $18.6 million. Additionally, we incurred increased costs for depreciation and amortization expense of $5.6 million arising from purchases of property, equipment and technology licenses, increased costs of $1.7 million for patent filing fees to protect newly developed intellectual property and other allocated expenses of $6.3 million related to our expanding operations.  Offsetting the increase in research and development expense was decreased costs of $5.2 million for prototype and related product tape-out costs, primarily due to the timing and quantity of tape-outs in the comparable periods.

We expect that research and development expense will increase in absolute dollars in future periods as we continue to devote resources to develop new and more complex products and systems, migrate to lower process geometries, meet the changing requirements of our customers, expand into new markets and technologies and hire additional personnel including absorbing the personnel from our acquisitions.

Research and Development

Research and development expense consists primarily of compensation and associated costs relating to development personnel, prototype costs, depreciation and amortization expense, and allocated occupancy costs for these operations. The increase in research and development expense in absolute dollars in the second quarter of fiscal 2006 compared to the second quarter of fiscal 2005 was primarily due to the net hiring of 154 additional development personnel, which contributed to an increase in salary and related costs of $6.1 million. Additionally, we incurred increased costs for depreciation and amortization expense of $2.3 million arising from purchases of property, equipment and technology licenses, increased costs of $1.2 million for patent filing fees to protect newly developed intellectual property and expenses of $1.7 million related to our expanding operations.  Offsetting the increase in research and development expense was decreased costs of $2.2 million for prototype and related product tape-out costs, primarily due to the timing and quantity of tape-outs in the comparable quarters.

The increase in research and development expense in absolute dollars in the first six months of fiscal 2006 compared to the first six months of fiscal 2005 was primarily due to the net hiring of 154 additional development personnel, which contributed to an increase in salary and related costs of $11.2 million. Additionally, we incurred increased costs for depreciation and amortization expense of $4.1 million arising from purchases of property, equipment and technology licenses, increased costs of $1.3 million for patent filing fees to protect newly developed intellectual property and other allocated expenses of $3.3 million related to our expanding operations.  Offsetting the increase in research and development expense was decreased costs of $2.8 million for prototype and related product tape-out costs, primarily due to the timing and quantity of tape-outs in the comparable periods.

We expect that research and development expense will increase in absolute dollars in future periods as we continue to devote resources to develop new and more complex products and systems, migrate to lower process geometries, meet the changing requirements of our customers, expand into new markets and technologies and hire additional personnel.