The fabless semiconductor company
Mellanox Technologies Ltd. (
reported second quarter 2012 earnings of 80 cents per share
(including stock-based compensation), which breezed past the Zacks
Consensus Estimate by 25 cents. Earnings surged 67 cents from 13
cents per share reported in the year-ago quarter, primarily driven
by better-than-expected revenue growth and margin expansion.
Total revenue in the quarter soared 110.7% on a year-over-year
basis to $133.5 million and comfortably surpassed the Zacks
Consensus Estimate of $120.0 million.
The strong revenue growth was primarily driven by higher demand
for FDR (Fourteen Data Rate) InfiniBand products, which contributed
54% of the total revenue in the quarter. InfiniBand contributed
90.0% of the total revenue during the quarter.
Hewlett-Packard Co. (
International Business Machines Corp. (
were the only two customers accounting for 10.0% or more of
revenues during the quarter.
Gross profit shot up 115.7% from the year-ago quarter to $93.7
million. Gross margin for the quarter stood at 70.2% compared with
the year-ago level of 68.5%.
Total operating expenses jumped 56.6% year over year to $59.8
million. This was primarily driven by strong growth in research
& development (up 59.0% year over year), sales & marketing
(up 58.3% year over year) and general & administrative expense
(up 36.0% year over year) in the quarter.
Despite higher operating expenses, operating profit jumped to
$34.3 million from $5.5 million in the year-ago quarter, driven by
strong revenue growth and higher gross margin base. Net income also
increased to $34.7 million from $4.9 million in the year-ago
Mellanox exited the quarter with $320.2 million in cash and
investments versus $259.8 million in the previous quarter. Cash
flow from operations was $59.2 million compared with $23.6 million
reported in the previous quarter.
Third Quarter Guidance
For the forthcoming third quarter 2012, total revenue is
projected in the range of $150.0 million to $155.0 million and
gross margins in the range of 70% to 71%. Operating expenses are
expected to increase 6.0% to 8.0% on a sequential basis.
We believe that Mellanox will continue to outperform its peers
based on strong demand for InfiniBand products particularly from
the high performance computing, cloud data centers and web 2.0
markets. Moreover, the company's expansions in the cloud and
enterprise storage segments are the other positives. The upcoming
Windows Server 2012 operating system is also expected to drive
results in the near term.
We have an Outperform recommendation on Mellanox over the long
term. Currently, Mellanox has a Zacks #2 Rank, which translates
into a 'Buy' rating in the short term.
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