The share price of Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) is plunging on weak guidance for the second quarter of 2013. The share price is down 9.2% in premarket trading on Nasdaq to $56.16, and down 8.1% by mid-afternoon on the TASE to NIS 202.60.
In the conference call, following the publication of its financial report for the first quarter, Mellanox forecast $92.5-97.5 million revenue, well below the analysts' consensus of $107.5 million, and 29% less than the revenue for the corresponding quarter of 2012.
Mellanox posted $83 million revenue for the first quarter, at the upper end of its guidance, which was also disappointing, and 6% less than for the corresponding quarter and 32% less than for the preceding quarter.
Mellanox's poor guidance raises the question, why? In 2012, most of the blame was attributed to poor expectations management by the company. This time, a range of companies are also indicating weak demand by large enterprises for computer and communications resources, as reflected by the results of Hewlett Packard Co. (NYSE: HPQ), IBM Corporation (NYSE: IBM), EMC Corporation (NYSE: EMC), VMware Inc. (NYSE: VMW), Oracle Corporation (Nasdaq: ORCL) and other computer giants.
"The start of the year has been challenging across the industry as a whole, and for Mellanox as well," said Mellanox chairman, president and CEO Eyal Waldman at the conference call. "We expect to see quarter over quarter growth from where we are today, as implied in our guidance for revenue growth of 14% from first quarter to second quarter. We continue to focus and execute on our 100-gigabit/per second InifiniBand and Ethernet solutions, which we plan to bring to market in the 2014 and 2015 timeframe. The fundamentals of our business have not changed, and we see demand for our solutions in our core markets, such as high-performance computing, Web 2.0, cloud, storage, enterprise data center, and financial services. We remain a leader and an innovator in a large market that is estimated to be approximately $6 billion."
Mellanox predicts that there will be strong demand growth this year by large Internet companies as they upgrade their server farms. Mellanox customers reportedly include Google Inc. (Nasdaq: GOOG), Facebook Inc. (Nasdaq: FB), Microsoft Corporation (Nasdaq: MSFT), and Apple Inc. (Nasdaq: AAPL). For Mellanox, these are large projects of $5-10 million each.
Waldman said that there were no big deals in the first quarter, in contrast to the corresponding quarter, but he hoped for such projects in the fourth quarter.
Published by Globes [online], Israel business news - www.globes-online.com - on April 25, 2013
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