2012 was a good year for Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX), which saw its sales, profits, and share price soar, but yesterday it opened 2013 with an announcement that indicates a change in direction. In line with a "Globes" reports a few weeks ago, Mellanox yesterday published a revenue warning, stating that its fourth quarter revenue will be $119-121 million, down from its previous guidance of $145-150 million. The company reiterated its non-GAAP gross profit margin guidance of 68.5-69.5%.
Mellanox's share price fell 13.9% in after-hours trading on Nasdaq, following the announcement, to $52.70.
Mellanox, a developer of InfiniBand high-speed connectivity processors, said, "The shortfall is primarily the result of a weaker demand environment, challenging macroeconomic conditions, and a technical issue associated with FDR 56Gb/s InfiniBand cabling which caused approximately $20 million of FDR deployments to be delayed. The cabling issue has been resolved and is not expected to impact revenue in the future."
Mellanox's winding road began in early April 2012, when the company soared on expectations that second quarter sales would be more than double sales for the corresponding quarter of 2011. Although the company indicated that the second quarter results would be a one-time event, its guidance for the third quarter was also a surprise, predicting that revenue would be more than double that of the corresponding quarter and that sales had reached a new order of magnitude.
The guidance boosted Mellanox's market cap to over $5 billion in September, when the company's guidance for the fourth quarter, published in October, proved a disappointment, and the company subsequently shed a large part of its value. It has lost over half its value since September, and is now traded at a market cap of $2.5 billion. Even so, the market cap is about 80% above its level of January 2012.
As for revenue, $120 million in quarterly sales represents 37% growth over the corresponding quarter, but is nonetheless a big disappointment for Mellanox's investors and for analysts, whose average forecast is $148 million revenue for the fourth quarter and $527 million revenue for the year as a whole. In yesterday's revised guidance, Mellanox predicts $500 million revenue for the year, 93% more than in 2011.
The big question is not about Mellanox's performance, but about its managers, who told analysts that the company's new base rose during 2012 to $150 million, from which further growth would be derived. The share price will likely respond to the news and it is possible that it will return to its level of a year ago, i.e. falling by 30-40%.
Published by Globes [online], Israel business news - www.globes-online.com - on January 3, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013