Mellanox plummets on disappointing guidance

CEO Eyal Waldman told "Globes" that markets are overreacting and Mellanox will return to quarterly growth in 2013.

The share price of InfiniBand developer Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) lost a quarter of its value on Nasdaq yesterday and in morning trading on the TASE, after offering a disappointing guidance, despite strong growth for the third quarter of 2012, beating the analysts' revenue and profit consensus.

Mellanox's share price fell 20% in morning trading on the TASE to NIS 311, after falling 6.5% on Nasdaq yesterday to $98.15, giving a market cap of $4.08 billion, and falling a further 18% in after-market trading.

Mellanox chairman, president and CEO Eyal Waldman told "Globes" this morning that the markets are "overreacting." He said, "We are satisfied with our growth. At the end of the day we are talking about of 100% for the entire year." He added that the company will return to its quarterly growth in 2013.

Revenue rose 130% to $156.5 million for the third quarter from $68.2 million for the corresponding quarter of 2011. GAAP-based net profit rose ten-fold to $48.4 million ($1.09 per share) for the third quarter from $4.8 million for the corresponding quarter, and non-GAAP net profit rose five-fold to $60.1 million ($1.37 per share) from $13 million. The company beat the analysts' consensus of $1.13 earnings per share on $153.1 million revenue.

However, in its guidance, Mellanox CFO Michael Gray predicted $145-150 million for the fourth quarter and $524-529 million for the full year of 2012, due to a 6-8% increase in operating expenses for the fourth quarter compared with the third quarter. The guidance below the company's third quarter revenue and it is also less than the analysts' revenue consensus of $157 million for the fourth quarter and $532.4 million for the year. Gray did not provide an earnings per share guidance, but the analysts' consensus is $1.11 for the fourth quarter - 300% growth over the corresponding quarter - and $3.74 for the year.

Mellanox had $405.4 million in cash and investments at the end of September, after a record $74.4 million in cash flow from operations during the quarter.

Waldman said, “Our third quarter results demonstrate the company’s continued ability to increase its penetration into existing markets, as well as to expand into new markets for our InfiniBand solutions. We also continue to see increased traction for our 10 and 40 Gigabit Ethernet products. We expect additional partners and customers to benefit from the higher return-on-investment that our fast interconnect solutions provide to them."

In the conference call following the publication of the results, Waldman said, "In the fourth quarter we don't see significant large deals that we've seen due to the Romley pent-up demand, and we're actually pretty happy to see that we're still staying with the baseline of $150 million." He added that he believes the company's Romley business would continue growing in 2013, as people continue building large supercomputers based on Romley and future generations from Intel.

Published by Globes [online], Israel business news - - on October 18, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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