Marvell Technology Group Ltd. said an audit-committee investigation identified a number of accounting problems at the chip maker but didn't find fraudulent activity.

The investigation by the committee of Marvell directors found that internal protocols weren't fully followed in the case of certain transactions and some revenue was recognized prematurely. It cited "tone at the top" issues, including pressure from management on sales and finance personnel to meet revenue targets.

Marvell, led by the husband-and-wife team of Sehat Sutardja and Weili Dai, has been grappling with issues that include the accounting investigation, a patent battle and the disclosure in early February that activist investor Starboard Value LP held a 6.7% stake in the company.


Analysts characterized the committee's findings as mild, having stopped short of recommending a broad restatement of Marvell's past financial results. The company's shares rose 2% Tuesday.

The probe, launched in September, focused on accounting of revenue recognized in the quarters ended in January, April and July of 2015. Marvell later disclosed that the Securities and Exchange Commission and U.S. Attorney's Office had also inquired about its accounting practices.

The audit committee expressed concern regarding Mr. Sutardja's claim to ownership of a chip technology considered important to Marvell's future.

Mr. Sutardja, who is both chief executive and chairman, has described the technology, called final-level cache, as a way to sharply accelerate the performance of storage devices that contain both disks and flash memory chips. According to the audit committee report, he initially asserted personal ownership of the invention. But company resources were deployed in developing the technology and he later assigned it to the company in patent applications, Marvell said.

The committee concluded that revenue from most of the transactions it examined were properly recognized, Marvell said. But a limited number of the deals resulted in booking revenue prematurely, generally through the extension of payment terms beyond the company's standard practice.

Marvell is evaluating whether the errors had a material impact on its financial statements. The company also said the transactions in question don't affect the total amount of revenue recognized over the three quarters in question.

Besides the transactions it has reviewed, the audit committee said it intends to examine certain matters that came to its attention during its investigation, including the setting of certain financial reserves. It hasn't determined whether those matters present any material issues, Marvell said.

The committee issued recommendations in response to its initial findings that include adding compliance, finance and legal personnel, reviewing some policies and procedures, additional training for some employees and the addition of independent board members.

Marvell on Feb. 23 named Deloitte & Touche LLP as its new accounting firm. It is also searching for a new chief financial officer.

The company several days earlier had agreed to pay $750 million to Carnegie Mellon University to settle a long-running patent dispute.

said Tuesday that it didn't expect to file quarterly financial results by a deadline of March 8--which previously had been extended--to meet requirements to remain listed on Nasdaq. The company added that it intends to request a hearing to remain listed until it has filed its financial reports.

--Marvell


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