Fabless semiconductor company
Mellanox Technologies Ltd.
) reported third quarter 2012 earnings of $1.14 per share
(including stock-based compensation), which breezed past the
Zacks Consensus Estimate by 22 cents. Earnings surged 94 cents
from 20 cents per share reported in the year-ago quarter,
primarily driven by better-than-expected revenue growth and
Total revenue in the quarter soared 130% on a year-over-year
basis to $156.5 million and comfortably surpassed the Zacks
Consensus Estimate of $153.0 million. This was slightly above
management's guided range of $150.0 million to $155.0
The strong revenue growth was primarily driven by higher
demand for FDR (Fourteen Data Rate) InfiniBand products, which
contributed 57% of the total revenue in the quarter.
) and Polywell Computers were the three customers accounting for
10.0% or more of revenues during the quarter.
Gross profit shot up 145.0% from the year-ago quarter to
$108.5 million. Gross margin for the quarter stood at 69.3%
compared with the year-ago level of 65.1%.
Total operating expenses jumped 53.5% year over year to $58.9
million. This was primarily due to a sharp rise in research &
development (up 55.0% year over year), sales & marketing (up
56.9% year over year) and general & administrative expense
(up 37.3% year over year) in the quarter.
Despite higher operating expenses, operating profit jumped to
$51.5 million from $8.2 million in the year-ago quarter, driven
by strong revenue growth and higher gross margin base. Net income
also increased to $50.7 million from $7.4 million in the year-ago
Mellanox exited the quarter with $397.7 million in cash and
investments versus $320.2 million in the previous quarter. Cash
flow from operations was $74.4 million compared with $59.2
million reported in the previous quarter.
Fourth Quarter Guidance
For the fourth quarter of 2012, total revenue is projected in
the range of $145.0 million to $150.0 million and gross margins
in the range of 68.5% to 69.5%. 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.
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.
HEWLETT PACKARD (HPQ): Free Stock Analysis
INTL BUS MACH (IBM): Free Stock Analysis
MELLANOX TECH (MLNX): Free Stock Analysis
To read this article on Zacks.com click here.