Mellanox Drops Most Since May in Tel Aviv on Growth Concerns

Mellanox Technologies Ltd. declined the most since May in Tel Aviv after its U.S. traded shares slumped yesterday on concern the Israeli technology company will report slower growth.

The shares dropped 6.6 percent, the most since May 20, to 276.2 shekels, or the equivalent of $69.64, at 11:32 a.m. in Tel Aviv. Mellanox shares tumbled 6 percent to $69.03 yesterday in the U.S.

Advanced Micro Devices Inc., the second-biggest maker of processors for personal computers, said second-quarter sales fell as slower growth in China and a worsening economic climate in Europe reduced demand for the chipmaker’s products. Asia accounted for 31 percent of Mellanox’s revenue in 2011, while Europe represented 15 percent, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index fell for a fourth day yesterday on concern technology companies’ corporate profits will drop.

“Investors are making a connection between Mellanox and Advanced Micro Devices, and concluding it means Mellanox’s sale will also be weak,” Brian Freed, vice president of equity research at Wunderlich Securities Inc., said by phone yesterday from Memphis. “In a market driven by fear, a connection like that will cause people to make a call to sell the stock.”

Server Sales

Slowing global server sales, which fell 2.4 percent in the first quarter, driven by a 14 percent decline in western Europe, are forecast to result in revenue declines for International Business Machines Corp., Hewlett-Packard Co. and Dell Inc., three of Mellanox’s largest customers, according to data compiled by Bloomberg.

AMD’s second-quarter sales dropped to $1.41 billion in the second quarter, trailing the mean estimate of $1.43 billion forecast by 28 analysts surveyed by Bloomberg. The company, whose sales beat analysts’ predictions in the first quarter, projected higher sales in April, citing growing demand for personal computers.

The earnings report came after the European Central Bank last week cut its benchmark interest rate to a record low and China also reduced borrowing costs, adding to signs that global demand for products may weaken.

Increasing caution in internet technology spending in North America and an uncertain economic situation in Europe is expected to hurt personal computer sales in the second quarter, according to a Bloomberg Industries report yesterday, which cited the IDC PC Forecast Tracker.

Mellanox will probably say on July 18 that second-quarter revenue was $128 million, compared with $63.4 million in the year-earlier period, according to the mean estimate of 11 analysts surveyed by Bloomberg.

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