Mellanox Falls to Eight-Month Low After Sales Forecast CuLeon Lazaroff and Robert Lakin
Mellanox Technologies Ltd. tumbled to the lowest level since April in New York after the Israeli developer of data-management technology cut its fourth-quarter revenue forecast on weaker demand and a product glitch.
Shares sank 17 percent to $50.7 at the close of trading in New York on volume that was seven times the stock’s three-month daily average, data compiled by Bloomberg show. Mellanox had the second-steepest decline on the Bloomberg Israel-US Equity Index of the largest U.S.-traded Israeli stocks, which fell 2.7 percent. Mellanox dropped 17 percent in Tel Aviv to 190.3 shekels, or the equivalent of $50.76.
Mellanox, based in Yokneam Elit, Israel, said in a statement released after U.S. markets closed yesterday that sales for the last three months of 2012 would be $119 million to $121 million, below guidance issued in October for revenue of $145 million to $150 million. Chief Executive Officer Eyal Waldman said in a conference call with analysts that the shortfall was due to weaker demand and a technical issue related to cabling for Mellanox’s FDR 56Gb/s InfiniBand product.
“The demand issue is playing a large part here,” Shebly Seyrafi, an analyst at FBN Securities Inc. who cut his rating on Mellanox to sector perform from outperform today, said by phone in New York. “It’s becoming clear that this window for 2013 isn’t going to be as robust as we we’re hoping for.”
Mellanox was the biggest decliner on the Bloomberg Israel-US gauge last quarter, dropping 42 percent on concern sales of its products used to transfer and store data will slow as Intel Corp. introduces similar technology. The stock fell 22 percent on Oct. 18 after the fourth-quarter revenue forecast issued that day missed the mean of 13 analysts’ estimates compiled by Bloomberg.
“The issue for investors is what’s going to happen in 2014 when Mellanox faces more significant competition from Intel,” Seyrafi said.
The technical problem with InfiniBand “is not expected to impact revenue in the future,” Waldman said today.
Santa Clara, California-based Intel acquired QLogic Corp.’s InfiniBand business on Feb. 29 to help the world’s largest semiconductor maker compete with Mellanox. The InfiniBand technology is used to transfer and store data in high-end computing and data centers.
“Until this profit warning, the company had consistently met its guidance,” Joseph Wolf, a Tel Aviv-based analyst at Barclays Plc, wrote today in an e-mail.
UBS AG reduced its 12-month price target on Mellanox to $56 from $70.
Adjusted gross margin in the fourth quarter will still be between 68.5 percent and 69.5 percent, Waldman said on the call. Earnings results are scheduled to be released Jan. 23, Mellanox said in a statement yesterday.