Fabless semiconductor company
Mellanox Technologies Ltd
) reported second-quarter earnings of 4 cents per share
(including stock-based compensation), which was much better than
the Zacks Consensus Estimate of a loss of 4 cents per
On a non-GAAP basis, earnings were 30 cents per share compared
with 99 cents in the year-ago quarter.
Total revenue was down 26.5% from the year-ago quarter to
$98.2 million. Reported revenues beat the Zacks Consensus
Estimate of $96.0 million. The company's revenues improved 18.2%
on a sequential basis.
During the second quarter, FDR 56Gb/s InfiniBand revenues
contributed 52.0% of the total revenue. 40Gb/s InfiniBand-based
products and 20Gb/s InfiniBand-based products represented 25% and
5% of the total revenue, respectively.
) with 10% and
International Business Machines Corp
) with 19% accounted for 29% of the total revenue.
Non-GAAP gross profit was down 27.6% from the year-ago quarter
to $68.1 million, primarily due to lower revenue base. Gross
margin for the quarter stood at 69.4% compared with 70.5% in the
year-ago quarter. Sequentially, gross profit increased 20.5%.
Including stock-based compensation, gross profit came in at $67.7
Non-GAAP operating expenses increased 1.9% year over year to
$52.3 million. As a percentage of revenue, operating expenses
increased from 38.5% in the year-ago quarter to 53.3%. Including
stock-based compensation, operating expenses came at $63.1
Non-GAAP operating profit for the quarter was $15.8 million
down from $42.7 million in the year-ago quarter, primarily due to
higher operating expenses. Operating margin was down from 32.0%
in the year-ago quarter to 16.1%. However, operating income
increased from $4.9 million reported in the previous quarter.
Including stock-based compensation, Mellanox reported operating
income of $4.6 million.
Non-GAAP net income was down from $42.9 million in the
year-ago quarter to $13.8 million. Sequentially, net income
improved from $4.3 million. Including stock-based compensation,
net income came in at $1.7 million.
Mellanox exited the quarter with $357.5 million in cash and
investments versus $396.2 million in the previous quarter. Cash
flow from operations was $11.5 million compared with $6.6 million
cash used in operations in the previous quarter.
For the third quarter of 2013, total revenue is projected in
the range of $104 million to $109 million (Mellanox reported $156
million in the third quarter of 2012) and gross margin in the
range of 67% to 68%. Operating expenses are expected to increase
9% to 11.0% on a sequential basis.
Mellanox reported tepid second-quarter results and also
provided tepid revenue guidance when compared on a year-over-year
basis. However, we believe that Mellanox's product offerings such
as InfiniBand products and Ethernet solutions will help the
company to drive top-line growth.
Moreover, the acquisitions of Kotura and IPtronics will drive
100Gb/s InfiniBand and ethernet solutions revenues in the long
However, sluggish macroeconomic environment, and increasing
competition from its peers such as
) may act as headwinds, going forward. Moreover, customer
concentration could be another headwind for the stock.
Currently, Mellanox has a Zacks Rank #4 (Sell).
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