Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 Marvell Technology Group Ltd. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and our instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. Now, I would like to turn the call over to Ashish Saran, VP of Investor Relations. Sir, you may begin.

Thank you, and good afternoon, everyone. Welcome to Marvell's second quarter and fiscal year 2019 earnings call. Joining me today are Marvell's President and CEO, Matt Murphy; and Marvell's CFO, Jean Hu. Before I turn the call over to Matt, I wanted to remind everyone that certain comments today may include forward-looking statements, which are subject to significant risks and uncertainties and which could cause our actual results to differ materially from management's current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today and posted on our website, as well as our most recent 10-K and 10-Q filings. We do not intend to update our forward-looking statements. During our call today, we will make reference to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available on our website in the Investor Relations section. As you know, we closed the acquisition of Cavium on July 6, 2018, approximately four weeks before the end of our second fiscal quarter. Therefore, the results we reported today for the second quarter of fiscal 2019 include the results from the Cavium businesses from July 6 to the end of the fiscal quarter. To provide a direct comparison to the second quarter fiscal year business outlook we provided in our earnings call last quarter, we have provided a table, which breaks out Marvell’s standalone non-GAAP results for the second quarter and exclude partial quarter results from the acquired Cavium business in our earnings press release. We are providing Marvell standalone non-GAAP results on a one-time basis only. As a reminder, that our non-GAAP results for standalone Marvell. Matt and Jean’s second quarter commentary will primarily focusing the results from the standalone Marvell business, as it relates to…

Great, thank you Ashish and welcome to the Marvell team, it’s great to have you on board. And good afternoon to all of you on the call, and thank you for joining us today. I’ll start with a summary of our second quarter GAAP results for the combined company. Revenue for the combined company was $665 million, GAAP gross margin was 56.7% and earnings per diluted share was $0.01. I’m now going to review standalone Marvell, non-GAAP results excluding those of Cavium. Jean will provide third quarter projections for the combined company. Q2 was another strong quarter for Marvell, once again we delivered solid results, driven by the strength of our core businesses, and continued operational excellence. We also receive regulatory clearance to close our merger with Cavium and begin integrating the two businesses. Together we are on our way to becoming an infrastructure solutions leader. Marvell’s standalone revenue for the second quarter came in above the midpoint of our guidance at $624 million, up 3% from a year ago, driven by strong growth in networking and continued growth in our storage business. We continue to improve our non-GAAP gross margin, reaching a record high of 63.5%, this reflects continued progress in improving operating efficiency, as well as capturing more value from our world-class engineering effort. Looking ahead, we will continue to focus on expanding our gross margin as we integrate Cavium. Marvell’s standalone non-GAAP operating margin for the second quarter was 30.1%, up 4.3 percentage points from a year ago. I am very pleased to report that we have achieved this target six quarters earlier than we originally projected at our last Investor Day, in March of 2017. Non-GAAP earnings per share on a standalone basis was $0.35 above the midpoint of our guidance and up 17% year-over-year. Moving…

Thanks, Matt, and the good afternoon everyone. I'll start with our GAAP results for the second quarter for the combined company. Please note our GAAP results include the impact of purchase price accounting items, amortization of intangibles, acquisition and integration related nonrecurring expenses, as well as stock-based compensation. Revenue was $665 million, gross margin was 66.7%, operating expenses were $385 million, operating loss was $8 million and earning per diluted share was $0.01. Turning to our combined balance sheet. I want to note that the inventory at the end of the second quarter was $473 million, which include the impact of setting up Cavium’s inventory by $223 million due to purchase price accounting. We amortized the $23 million of the step-up into COGS in the second quarter. And that we anticipate amortizing the remaining balance by the end of the fourth quarter of fiscal 2019. Please note, our non-GAAP results exclude the amortization of inventory step-up charges. We exit quarter with $524 million in cash and the short-term investments. Our long-term debt was $1.9 billion and currently carry a blended interest rate of 4.3%. Our gross debt to EBITDA ratio was 2 times and the net debt to EBITDA ratio was 1.4 times based on a combined pro-forma EBITDA. We currently expect to start paying down the debt this quarter and anticipated stepping up the pay down rate to approximately $100 million per quarter starting the fiscal 2020. As a result, we believe we can quickly get to our targeted ratio of 1.5 times gross debt to EBITDA. In the second quarter, we distributed $39 million to share projects in dividend. I will now move on to standalone Marvell non-GAAP results for the second quarter for fiscal year 2019. As Ashish had noted, we are providing standalone Marvell results on…

Thank you. [Operator Instructions] Our first question comes from Ross Seymore with Deutsche Bank. Your line is now open.

Thanks guys. So let me ask a question and Jean thanks for all the details about the ins and out with Cavium. One follow-up question to that for either you or Matt is it appears that the Cavium revenues if you say they're clean in your January quarter and we just added back in that two of that $25 million for the $210 million that you're guiding to in October. You'd still be down kind of high-single-digits year-over-year. So can you just talk about what you think that Cavium revenue growth rate can be off of that base, and kind of the 235-ish range going forward? And why is it down that much year-over-year?

Sure, Hey Ross. This is Matt I'll take this one and let Jean add if she like to. So, yes, the way to think of it as we're guiding $210 million for Q3 than to the best of our knowledge and the analysis we've done. There is $20 million that will still get consumed. So you should assume a $230 million run-rate. To answer one part of your question that's the base line run-rate that we believe we can grow the company off of based on the annual growth targets that we set when we announced the transaction. The year-over-year change primarily you can attribute to inventory. Obviously that we're now going back sort of a year-end time. So reconstructing that and for the detail is challenging, but what we do know, is when we look through at the current set of customers now that we’ve got Cavium under the Marvell umbrella, we look at the channel inventory and customer inventory and demand patterns, we feel very confident that the -- we’ll exit Q3 with inventory overall normalized to the Marvell levels.

Great. And I guess for my follow-up just switching gears to the storage side of your business and maybe just the classic Marvell side. Lots of debates these days on the NAND pricing market, I know that doesn’t directly correlate to what your SSD business does one way or the other. But this is the first quarter in a while you hadn’t highlighted what SSDs were as a percent of business. Can you just give us an update on how that segment of your storage business is ramping?

Sure, Ross no problem and yes, I think we’re adjusting here to having a much broader portfolio of products to talk about. And so with respect to SSD that business continues to perform well, we have seen multi-years now of pretty strong compounded annual growth in that business. With respect to -- I won’t comment specifically on pricing or we’re not sort of the barometer on demand and pricing, but certainly I think it’s widely reported that supply continues to come free and I think to that extent that’s going to be good for certainly people that supply into this market including us. I’d also add that on top of all that our progress and effort to really grow our presence in the enterprise and data center segment of SSD continues to make very good progress. And so I think as you -- we had the Analyst Day plus future calls when we had sort of a Cavium ins and outs settled, we can continue to give you more color there. But we still see strong business in SSD for the company.

Great, thank you.

Thank you. And our next question comes from the Vivek Arya with Bank of America. Your line is now open.

Thanks for taking my question, and good to see the Cavium results integrated and all the details. First question Matt, you mentioned strong sequential growth for Cavium in Q4, what does that imply, does is get you back to the $230 million baseline or can it be stronger than that, I am just trying to see what a normal Cavium contribution quarter looks like?

Yes, I think I’ll focus just to the specific what I said, which was -- and again normally we wouldn’t lean out kind of two quarters out that’s never been our practice, but given the circumstances, we felt when needed to give some color there. So yes, I think the way just to read it very simply is take the $210 million assume that’s the run rate, add $20 million back and so $210 million going to $230 million is a baseline to think about, obviously we’re not guiding that formally and we have got to see how the business does during that timeframe, but at this juncture I think for everybody on the phone and the investors listening I think that’s the best view that we’ve got at this point. So that’s really the growth we’re talking about, that $210 million to $230 million.

Got it. And for my follow-up Matt, so good job on gross margins, you’re kind of close to the 65% or so pro forma target and I recall that when you gave that target Marvell’s organic margins were 61%, but now they are 63.5%. So is it possible that longer term you could perhaps do better than the pro forma targets you had outlined before.

Okay, yes, thanks Vivek. I think if you go back to when we announced the transaction, you’re right, we said 65% was our long-term target and at that time we were in that range. So we have been very pleased with the performance of core Marvell, since we announced this that business has strengthened on revenue, it strengthened on gross margin and operating income. And so that’s been a nice tailwind heading into the closing of Cavium. We’re certainly not -- we’re not ready to update our targets at this point, although we have an analyst day coming out, but you should assume that the -- one of the guiding principles. I’d say that I have infused in the company over the last two years has been to really drive the gross margin as a reflection of the quality of the engineering in the company and the value we deliver and we think it’s a huge lever on our company’s overall value. So we pay attention to it, we manage it and we’re certainly happy and the first quarter out at the revenue level that we're guiding, that we can already be in the 64% to 65% range. So look for us to keep driving that higher over time, but let's wait till Analyst Day to do more extensive update on what we think we can do.

Thank you.

Thank you. And our next question comes from John Pitzer with Credit Suisse. Your line is now open.

Yes, good afternoon guys. Thanks for letting me ask the questions congratulations Matt on the good start with Cavium. You did a good job kind of outlining the synergies from cost of COGS and OpEx. Wondering if you talk a little bit more about kind of the icing on the cake, which is the revenue synergies. How do you think or how do you see that playing out from sort of the lowest hanging fruit to some of the higher hanging fruit? And I guess as you answer the question, I'd love to kind of get sort of the customer reaction on the compete side of Cavium, ThunderX, ThunderX2 now that it's a part of your organization, a larger organization with perhaps more support.

Sure, so let me break that into two questions. And I'll start with the revenues synergy, which really ties into the customer feedback since we've closed the transaction. And certainly, the fact that the customer base and the infrastructure market, right, whether that's cloud or hyper scale data center companies, the leaders and wireless base stations driving the 5G transition. Our traditional strong enterprise customers, the feedback has been resoundingly positive. And I think what we're finding is a few examples where, I mean, one I can give is, one of our large networking customers were actually Cavium has more revenue and position than we did. We were chasing design wins there, kind of for a few years, close the transaction, engage at the right level and I think on the basis of the hard work we’ve put in. But also I think on the basis of the combined larger relationship, we were awarded sockets on products that we had never had before at that account. And so I think this -- and I think if you look at the switch products we have with our PHY technology plus the processor products from Cavium we're seeing a lot of cross selling opportunities. So we're not quantifying the revenue synergies, I want to be clear on that. We've been sort of out with a shoot saying any revenue synergy get would be on top of the growth targets that we set. But we certainly see strong leading indicators that this could definitely be one plus one equals more than two from that point of view. With respect to Thunder probably helpful to comment on that as well. That's been an interesting evolution really even since we announced the acquisition from sort of us announcing supercomputing if you remember last year in 2017 ThunderX2 had a very strong initial showing. Subsequently, if you look at it, basically the parts release to production got strong customer traction. We're shipping it now in production. And I think the customer base is looking to us and the ecosystem to really continue to support that effort. Because if you look at the leading benchmarking companies out there like a non-tech and others, thunderX2 is performing extremely well on especially memory intensive applications versus Skylake [ph]. So that’s an emerging business. But what I characterizing it right now is strong customer pool, parts out, released it’s a good product. And we’ll be happy to update you on that as we make progress there.

That’s helpful, Matt. And maybe as my follow-up, just going back to the core Marvell storage business. Clearly there has been some more mixed data points on the hard drive side of the market. I guess if you look out to your October guidance is there any color you can give us as to how you’re viewing hard drives versus SSDs? And can you remind again, kind of the mix benefit as more moves towards SSDs and/or perhaps the ASP benefit as densities of platters go up within core HDDs?

Hi, John. Yes, when we look at our storage business, we’re actually very pleased with the performance looking into Q3, when we guided. Frankly, we continue to see our storage business growing year-over-year, including both HDD and SSD business, SSD business definitely is growing double-digit year-over-year. So overall when we look at this the momentum with our SSD business continues and the way are pivoting more into the enterprise data center with both our SSD and HDD business. So I think we're very pleased with our overall like migration as the percentage of revenue the enterprise data center become increasingly more when we have our Investor Day we'll definitely update you about the journey and progress we have made during the last year and half. So overall, we are pretty happy with Q3 how we look at the storage business. There is not much significant change from momentum perspective.

And John, I'll just add I think that was a great summary. Just to close on that, I think you’re -- the part you mentioned around the HDD aerial density opportunity improvements that we could potentially have been to help drive that market forward. We are very much pleased with our progress there. Our latest read channel technology is I think going to help enable many new applications as HDDs in the cloud and data center for cold storage pushup to higher and higher levels of capacity. And I think we're going to be at the leading -- at the forefront of enabling technologies like Hammer or Mammer [ph] or Dual Actuator. Those are all opportunities for Marvell's differentiated IP and strength in the market to enable a very important part of what we think is going to be the -- for the cloud and hyperscale companies.

Thanks, guys. Appreciate it.

Thank you. And our next question comes from Blayne Curtis with Barclays. Your line is now open.

Hey, thanks for taking my questions. So just going back to the Cavium revenue, I think you've described it as multiple factors that cause the shortfall. You addressed the inventory portion, I was curious if you just address some of the end market weakness like service providers, as well as some of the new product forecast versus actual revenue. And then kind of as you look forward here, can you just describe your level of confidence at this point in understanding all of those moving pieces.

Sure, Blayne. So I'll give you my perspective on this and then Jean can add. So I'd say going back to the inventory question the Cavium revenue. So if you think about the inventory that was built that was sort of -- you could -- you should imagine was running at a higher days of inventory than Marvell had run, whether it was in the channel or in the end customer quite frankly even in the factory. That was fairly broad based in nature, because that's just how they ran their business. So as we've now own the company for eight weeks and again trying to under our watch, the -- I'd say the inventory now that's impacting the revenue is really around end market, which is primarily the service provider base station market, which is going through its own lumpy to begin with. And then you layer on top this 5G transition, which from everything we're hearing is going to be meaningful next year and probably pull in certainly ahead of where people thought it would be a year ago. So I think that transition that's looming is causing some lumpiness. And so the bulk of the remainder inventory to be consumed is really in that area and that's primarily setting in at our OEM customers. But that's how I characterize it as you start broaden and you just sort to narrow it down to the $20 million that's the way to think about it. And to the extent that we continue to be successful in service provider there is going to be lumpiness in that business. I think everybody understands that. But…

Yes and also believe we did say the XPliant and MontaVista which we sold the business. Those combined revenue impact revenue run rate is probably about a little bit more than $20 million a year. So that's certainly is small, but is some of the impact too.

Helpful. And then for Jean, just on the OpEx, you're raising the range. I think Cavium came in higher in the March quarter by about that much. So I'm just kind of -- so how do you think about the increased savings that you're getting. Is it just really the outside of the Cavium did or are you finding other areas. And then you had a higher range for a longer time period, I'm just kind of curious if that's the whole suite off the genre?

Yes, I think our combined team they did a great job to quickly integrate the R&D roadmap and also all the other different functions. So we certainly see the increased savings from more efficiency driving through the combination of the team to save more money on some of the investment areas and also on the SG&A support areas. So certainly how we work through the process is we use the base run rate the Cavium as you mentioned Q1 in 2018 and our last quarter run rate that’s the baseline then the team literally work through every line item and every work stream to drive the synergy achievement. So, $200 million I would say across the board the increase come from both R&D and SG&A areas.

Yes, and that’s perfect. I just want to add one thing Blayne which is yes Cavium OpEx ended up being higher in the March quarter as you mentioned, but when you go back and even we go to our original models, we always had this $1.3 billion OpEx run rate that was going to be our target baseline, which is $325 million a quarter. And as the year progressed, obviously Cavium’s OpEx was higher, but then Marvell’s as you can see in our standalone results was 208. So while theirs came in higher, ours came in actually lower, we manage it pretty efficiently. So, that $1.3 billion run rate actually still the same. So, we didn’t -- said in other way getting to 200 isn’t because we’re just resetting Cavium to whatever their level was, we as a -- we looked at it as a combined run rate and that’s just what’s -- that’s helpful to think about it.

That’s helpful. Thanks, Matt.

Thank you. And our next question comes from Mark Delaney with Goldman Sachs. Your line is now open.

Yes, thanks very much for taking the questions. First question to follow-up on synergies topic and Jean thanks for all the clarity, what are the remaining OpEx synergies beyond this upcoming quarter, can you help us understand the linearity that you’d expect to achieve those.

Yes, that’s a good question. So, as often you know the system integration, ERP integration typically takes 9 to 12 months. So there are lot of synergy dollars that will be tied to one ERP which typically will come off four quarters -- three or four quarters from now. So the way we’re thinking about to help you model is the Q3 OpEx is going to be largely flattish at that level. Then the first half of fiscal 2020, you should see some step up because the payroll managing and merit increase then certainly when ERP has you will see the step down to the run rate what we talked about Matt mentioned from $325 million run rate before the close of the deal to in the end close to $290 million run rate exiting Q4 2020.

Got it, that’s helpful. And then for follow-up question on the HDD controller business, so one of your customers had announced the factory shutdown and then on the past some of those factory shutdowns have led to some periods of inventory accumulation and I don’t know if that’s anything that Marvell is seeing or able to quantify or when you think you might see in the upcoming quarters.

Yes, Mark, this is Matt, I’ll take it. I think our perspective is the following, we have lived through many of these shutdowns in the eight quarters, I have been on the job here, so this is nothing new. In terms of managing through these transitions, actually I remember back at the Analyst Day, we had in 2017 this had just got on and the way that we managed it then we’re managing it now as you should think about that we have -- we’re very plugged in with those companies in terms of understanding their inventory and their supply chains. And so we have comprehended any transitions that they have in their business and our forecast, I can’t really comment more on what each of these companies is doing and the reasons for and the details, but we’re very aware of these things and we have a number of things that we do also in monitor inventory that at the end customer level, as well as their sell-through. And so we have a number of ways that we use, we manage our forecasting in environment sometimes when there is these transitions. So all I can say is we’re aware it, we’ve baked it in and it’s part of our guidance.

Thank you.

Thank you. Our next question comes from Joe Moore with Morgan Stanley. Your line is now open.

Great, thank you. I wonder if you guys could talk about the China tariff situation. Do you see any impact that it’s having on your customers either the first couple of ways or the ways that are coming? And I guess do you see any risk of customers trying to accumulate inventory to sort of manage moving their geographic footprint around the world? Thank you.

Sure Joe, I'll take it. So I'd say the first point is to make, I think you didn't ask it but I’ll just answer, which is the tariff themselves have really minimal to no impact on Marvell in terms of us manufacturing in China and then shipping parts here for consumption in the U.S. So the tariffs directly on us is not really an issue. But as you point out the bigger concern is what's the global impact of the tariffs on our customer base and does that drive different behavior. And certainly, we're concerned like everybody is about the global economic impact of the trade war escalating. I can't think of any specific issues related to customers that are telling us right now, we're buying more inventory or taking less because of the tariffs. But we certainly know it's out there and it's going to, to the extent that this becomes a larger global GDP issue then certainly semiconductor companies will feel it. But I can't help much more than that, because I can't give you any direct commentary, because we're not getting that when we do our demand pulses right now, but it may be out there.

Make sense. Thank you very much.

Thank you. Our next question comes from Karl Ackerman with Cowen & Company. Your line is now open.

Good afternoon. Two questions please, Matt and Jean, I wanted to go back to your comments on the synergy targets. Should we expect all of those cost savings to flow to the bottom line? Or are you looking to repurpose those moneys into R&D within the core portfolio. And I guess as a follow-up, as your portfolio has become more diverse, how do you prioritize R&D so you are now very broad networking portfolio? Cavium's rule of thumb half of sales growth, is that still the right way to think about spending for your business. Thank you.

Okay, I'll take your question. Matt can add on the R&D resource allocation side. So, as far as the synergy, our objective is we're targeting $200 million run rate synergies. And they're all going to flow through at the bottom line. That part is clear. There is certainly -- there is a timeline we just outlined how we're going to achieve that synergy. But our objective is to drive the earnings and the shareholders' value there. As far as the R&D investment frankly, Matt mentioned during his prepared remarks, we just went through our annual strategy and portfolio review. That's the process that we look at all the different product lines to allocate results among different product lines. So from investment dollar overall perspective, we feel we have the right investments. Matt probably can comment more on the process how we look at the resource allocation.

Sure. I think happy to take that one. So, the first comment I'd make is even if you go back to when a standalone company we went through our own transformation and we had our own plans there, which was $250 million of OpEx reductions at that time. Actually if you guys remember, we actually invested in key businesses during that time. So it was not just, hey, we're going to go take out cost and everybody suffers. We use that opportunity as an example to increase our headcount staffing in our SSD and networking areas. And I think we're seeing the benefit of that now paying off. And so the way we look at it as Jean mentioned, that’s $200 million obviously to the bottom line. But with that, you should assume there is some add backs that are netted out and we're going to go deeper in some areas, we're going to add back that in others. And we view this as one of the most important things, we do in the company. We have an annual review where -- and by the way, every company does it differently, as you mentioned Cavium kind of have a high level way of doing it, take sales growth cut in half and higher to that. We have a I think pretty rigorous approach to segmenting all of the investments we're making. So we actually have P&Ls now for all the Marvell businesses, all the Cavium businesses. We know what those businesses' relative market shares are, their gross margins, their growth trajectories and ultimately what their operating margins are and their level of contributions of the company. And then based on that, we make decisions about how we're going to fund those businesses, whether we need to reduce or transfer people or re-hire in certain areas. And so, even though we're going through our synergy achievement, we have a significant number of open Rex [ph] in the company, because we're hiring key talent in areas where we think we can grow. And we’ll continue to do that and be good stewards of the R&D expense because we view that as the most critical resource we have. And so we deploy it in a very thoughtful and data driven way that really should think of it as a combination of technical analysis on the products and their prospects as well as integrated with the financial analysis. And we've done -- we've actually empowered the engineering leaders in the company the business unit leaders as well as my executive staff. So we're looking at those as an integrated way to run the company. And that was a little bit of a longer answer, but for those of you that might be new to the story that's been the playbook and we plan on continuing that on an ongoing basis.

Thank you very much.

Thank you. Our next question comes from Craig Ellis with B. Riley FBR. Your line is now open.

Thanks for taking the question and congratulations on the core Marvell performance in the quarter and appreciate all the financial information. The first question I had was on revenues Matt and it's really more of a long-term question. As we look ahead to the fiscal fourth quarter when Cavium is back to more normalized revenue level. If I understood you correctly, that's the base from which the company can proceed towards the 60% revenue growth target. So the question is how long does it take to get there and what are the three or four key things that need to happen for you to attain that goal on a sustained basis?

Great. Yes, so Craig, on the first part, you captured that correctly. At this time that's our best assessment, which is take the Q4 revenue and then apply the growth rate to it. And certainly having come up with our strategy review process where we just reviewed all these businesses we reviewed their next three year outlook, we reviewed how fast the market is growing, and we'll give more detail of this on Analysts Day. But from a market perspective, we see the end markets that we're targeting growing at, at least these kind of rates, and certainly we think for being good managers, we should be able to do that or better. I think the high level, I would just give you is you think about really we have two big businesses now that are really portfolios. There is a strong portfolio under each in storage. I think the way to think about that one is, it's got two very strong cash flow businesses in there where we have significant market share and differentiation, but they're slower growing markets, and those are flattish and those are HDD and fiber channel. But if you layer in our SSD business and our flash business, which we really expanded from SSD controllers to really flash based solutions, seeing it our FMS announcements that business should continue to grow. So you can do your model thinking about it that way. And then as within networking, if you just take a look at core Marvell networking is a pretty good proxy for what one can do in a networking business. When you execute on R&D, you protect the right customers, you define the right products. We see that business continuing to grow right at double-digits or greater. And we also think about OCTEON and Fusion and the processor business from Cavium having a similar type of profile. And again, as I mentioned, some of those were finding are more than we thought are actually in the same application. So I think the way to think about that is you've got those businesses, you've got our security business, which is making a transition to the cloud. And there has been a number of announcements from large cloud providers on liquid security, so we see that as being a good growth business. And so the networking portion of the total should clearly grow faster than the storage. But I think when you start running your own models and you’ll have your own view based on end markets and what they’re doing and based on our own kind of product line by product line view. We think that those targets we set are very achievable and we’re going to drive the company hard to go do that.

Thanks for that. And then the follow-up question goes back to comments that you've made on prior calls. You expressed strong interest in returning to cash return via share buybacks, Jean outline debt paydown of $100 million per quarter beyond the current quarter. So in light of debt pay down, when do you expect you can return to share buyback? And Jean if I could sneak one in for you since every client will be asking it tomorrow. What’s the timeline to quarterly earnings accretion on the former Cavium business, it doesn’t look like we would be getting that in the fiscal third quarter, but can we expect that in the fiscal fourth quarter. Thanks very much, Jean.

Two questions, right. So the first one on the cash return, certainly we want to target 1.5 times gross debt of EBITDA ratio, so we do want to pay down that quickly. However the combined company is going to generate very significant amount of cash flow. So we do see we should be able to starting to consider buyback once we get to 1.5 times ratio, which should happen quickly. Our overall view we’ll share more about the capital allocation during our Investor Day. But overall the strong cash flow generation, we should be able to employ capital in a way benefit shareholders the most going forward buyback certain is one for the two element, we’re going to focus on two. So that’s your first question. Second question on accretion, certainly, I think if you look at Q3, as we mentioned earlier, we are resetting Cavium side of the revenue to make sure their process is aligned with our process, so we can be more efficiently run the combined business going forward. We do expect the cushion in fiscal 2020 and frankly if we diligently manage our $200 million synergy achieving plan and also really drive top-line revenue growth, we do see double-digit accretion when we get access in fiscal 2020. So we are very optimistic about our capability to run the business, as you know, we have the track record as the company to really drive the efficiency and also drive the top-line revenue growth.

Thanks, Matt. Thanks, Jean.

Thank you. And our next question comes from Quinn Bolton with Needham and Company. Your line is now open.

Hi, Matt and Jean, thank you for the -- all the detail on Cavium. Just wanted to come back with that you had sold the MontaVista business, but can you say what have you done with the XPliant business?

Sure, I can take that. So, hi Quinn. So on XPliant that product line and team and critical IT have been largely integrated into the Marvell switching team. So as you guys know, we have a large successful switching group inside of Marvell, there was a lot of discussion and integration planning on R&D on how to take the roadmap forward. And I think based on -- and it was joint decision between Cavium team and Marvell team that everybody agreed that the Prestera architecture ROS that we provide was the right way to go. And so we’re going to drive that one forward, so that business has now been folded in. Clearly there is some revenue headwind on the XPliant piece, as we mentioned because once this was even -- once actually acquisition was even announced I mean I think customers who were looking at both sort of were wondering and that definitely had a pause and that is resulting in some of those design win probably ramping down faster than we thought, certainly not getting new ones during this timeframe. So Cavium as Jean mentioned, MontaVista plus XPliant is about $20 million a year run rate MontaVista out and XPliant will wind down, although we’ll support it any customer that’s designed it in or is in the process of designing in we’re going to support them with our larger engineering team, but that’s how you should think about XPliant it’s not a standalone business anymore, it’s just run as part of Marvell switching.

Great. And then follow-up, at Analyst Day for the core Marvell storage business I think you were targeting about a 3% growth rate for that business on a both combined HDD, SDD. As you bring in the fiber channel business form Cavium, does that 3% CAGR changed at all?

So we’ll give you update on our upcoming Analyst Day. But it should change much. Matt, just mentioned both HDD and the fiber channel they're mature business they generate tremendous cash flow and we are going to drive the businesses to grow flattish with the market as both of those business. And so, we'll share more during our Investor Day about the prospect of our storage business.

Yes, I think that's the right forum. If you go back to the last one, a lot changed from now to then right I think SSD has significantly outperformed sort of where we thought it would be back then as a market in our own business. And I think Marvell storage overall has actually done better than we saw. So I think that's the right form we’ll have more time under our belt. And we can give you the full view of the storage portfolio. But…

Great, thank you.

Thank you. This concludes today's Q&A. I would now like to turn the call back over to Ashish Saran for closing remarks.

Thanks everyone for joining us today. And we look forward to talking to you all again next quarter. Thank you and good bye.

Ladies and gentlemen thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.