Mellanox plunges on Intel rivalry rumors

Analysts can see no justification for the share's latest slump and reiterate a "Buy" recommendation for the Infiniband developer.

The share price of Infiniband developer Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) is down sharply on the Tel Aviv Stock Exchange this morning after plunging on Nasdaq yesterday. The share price was down 9.1% in the early afternoon at NIS 295.10 after falling on Nasdaq to $76.23 yesterday, giving a market cap of $3.23 billion. Market sources say that persistent rumors that Intel Corp. is moving ahead in the development of its rival product are hurting Mellanox.

Sources that know Mellanox well told "Globes" that there is nothing new to report and certainly not anything negative. So far as Mellanox knows, the sources say, the rumors concerning Intel are not true, and even if the chip giant does develop a new product, Mellanox's 100 gigabyte product will be on the market at least 18 months before Intel's.

Last night, Barclays Capital put out an update reiterating their "Buy" recommendation for Mellanox at a target price of $100 per share, a 31% premium on last night's closing price on Wall Street. Deutsche Bank also has a "Buy" recommendation and a target price of $110. The share reached a record high of $120 and a market cap of almost $5 billion in September.

Harel Finance analyst Rami Rosen maintains his "Outperform" rating and a target price of $100. He said, "We cannot find any support for what happened yesterday. The story about Intel is not new, it is a known risk, and the company is not ignoring it and analyst's models contain this within. We do not know anything new."

A trading room dealer told "Globes," "It could even be malicious rumors by investors with short term interests. We don't know anything knew. In any event at a price of $76 per share Mellanox looks very interesting."

Published by Globes [online], Israel business news - - on November 29, 2012

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

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