Big technology company Oracle has taken advantage of the positive momentum in Mellanox Technologies Ltd.'s (Nasdaq:MLNX) share price to sell 40% of its shares in the company for $104 million. Oracle reduced its stake in the Israeli big data connectivity company from 7.4% to 4.3%; its holdings in Mellanox are now worth $146 million.
Mellanox, founded and managed by president and CEO Eyal Waldman, develops and markets communications equipment for high-speed data transmission. Its market cap is $3.4 billion, following a 30% rise in its share price in recent months after it was learned that activist fund Starboard had invested in the company. The fund expressed dissatisfaction with Mellanox's operating profit margin, and recently published a demand for the appointment of nine directors to represent it in the company.
Oracle invested in Mellanox for the first time in October 2010, buying 10% of the company in deals on the open market for an aggregate $40 million at prices ranging from $19.70 to $21.50 per share. The sale of shares by Oracle in recent days reflects a respectable return on Oracle's investment in Mellanox, selling Mellanox shares at prices ranging from $63.30 to $68.60.
From the beginning, Oracle classified its holding in Mellanox as being purely for investment purposes, not a hostile takeover or an attempt to influence the company's business. Oracle has now reiterated that its holdings in the company are for investment purposes, and that it may sell the rest of its shares.
Mellanox yesterday published a presentation for investors, in which it stated, "Our focused investment strategy has generated long-term revenue growth," with 27% average annual growth since 2007 (although growth in 2017 was lower than the average - only 0.8%). Other figures in the presentation concern the company's profit and creation of cash. For example, it was stated that Mellanox had reported a 72% gross profit margin over the past three years - the highest in the industry.
Mellanox recently provided guidance for 2018, and is now doing the same for 2019 and later. The company projects over 10% growth in revenue and an operating profit margin of over 25%, starting in 2019.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 24, 2018
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