NEW YORK (Bloomberg) ? Marvell Technology Group Ltd., which makes semiconductors used in Apple Computer Inc.'s iPod, reported third-quarter sales rose 22 percent, the smallest gain since the company went public in 2000.

Sales increased to $520.4 million from $426 million a year earlier, the Bermuda-based company said today in a statement. Marvell didn't report net income for the period ended October 28 because of a review of stock-option grants and was already a quarter behind in its reporting.

Slumping sales of chips for computer disk drives and excess inventory at customers' warehouses led Marvell to cut its sales forecast on October 2. I

t marks the first time quarterly sales failed to grow sequentially. An acquisition from Intel Corp. will dilute earnings more than thought and revenue in Marvell's core business was "light," said Shaw Wu, an analyst at American Technology Research.

"A combination of these reasons is why the stock is off," said Wu, who rates the shares "buy" and doesn't own them. "The consensus earnings estimates will probably come down."

First-quarter sales will be $620 million to $630 million. The forecast includes $90 million to $100 million in sales from the acquisition of an Intel unit that builds chips for the BlackBerry, Treo and Q handheld devices.

Analysts project sales of $595.4 million, the average of estimates from Thomson Financial, which didn't say whether the figures include the Intel unit. Analysts had estimated fourth- quarter profit of 15 cents.

Shares of Marvell dropped 73 cents to $18.89 in extended trading after sales were announced. They lost 5 cents to $19.62 at 4 p.m. New York time in Nasdaq Stock Market composite trading and have declined 30 percent this year.

Third-quarter sales topped the average estimate of $516.9 million from 23 analysts surveyed by Thomson Financial.

Marvell, run from Santa Clara, California, said in October it will restate results for the past six years to record costs for misdated stock-option grants to executives.

The chipmaker faces lawsuits over its handling of the options, and has disclosed investigations by the US Securities and Exchange Commission and Justice Department.

Marvell also makes chips used in Sony Corp.'s PlayStation Portable game machines and Hewlett-Packard Co.'s notebook computers.