Mellanox Technologies Ltd
) reported third-quarter earnings of 2 cents per share (including
stock-based compensation), which was much below the Zacks
Consensus Estimate of 8 cents per share.
Revenues plunged 33.5% from the year-ago quarter to $104.1
million and were well below the Zacks Consensus Estimate
During the third quarter, FDR 56Gb/s InfiniBand revenues
contributed 48.0% of the total revenue while Ethernet products
contributed 15.0%. Moreover, Mellanox's 40-gigabit Ethernet
revenues also increased.
Additionally, its customers
) contributed 12% and 17% respectively, accounting for 29% of the
Non-GAAP gross profit was down 35.0% from the year-ago quarter
to $71.8 million, primarily due to lower revenue base. Gross
margin for the quarter stood at 68.5% compared with 70.3% in the
year-ago quarter. Including stock-based compensation, gross
profit came in at $71.4 million.
Non-GAAP operating expenses increased 17.4% year over year to
$58.1 million. As a percentage of revenues, operating expenses
increased from 31.6% in the year-ago quarter to 55.8%. Including
stock-based compensation, operating expenses came at $69.6
Non-GAAP operating profit for the quarter was $13.7 million,
down from $60.9 million in the year-ago quarter, primarily due to
higher operating expenses. Operating margin was down from 38.9%
in the year-ago quarter to 13.1%. Including stock-based
compensation, Mellanox reported operating income of $1.7
Non-GAAP net income was $13.0 million, down from $60.1 million
in the year-ago quarter. Including stock-based compensation, net
income came in at $0.9 million or 2 cents per share down from
$51.5 million or $1.16 per share in the year-ago quarter.
Mellanox exited the quarter with $306.4 million in cash and
investments versus $411.3 million in the previous quarter.
Moreover, the company paid $123.5 million in cash for its
acquisitions of Kotura, Inc. and IPtronics A/S. Cash flow from
operations was $16.4 million compared with $11.5 million cash
used in operations in the previous quarter.
For the fourth quarter of 2013, revenues are projected in the
range of $105 million to $110 million 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 mediocre third-quarter results but provided
modest 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.
Currently, Mellanox has a Zacks Rank #2 (Buy).
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