Mellanoxe’s troubled record revenues

25 April, 2016

The company reported record revenues of $196.8 million in Q1 2016 – but a net loss of $7.2 million that drove its share to a dive

The company reported record revenues of $196.8 million in Q1 2016 – but a net loss of $7.2 million that drove its share to  a dive

Mellanox's new Spetrum product line
Mellanox’s new Spetrum product line

Mellanoxe’s quarterly report has sent the company’s shares on the stock market on a wild ride. The company achieved record revenues in the first quarter of 2016, totaling $196.8 million. This figure represents 11.2% growth compared to Q4 2015 and 32% growth compared to Q1 2015, which did not yet include the revenues stemming from the acquisition of EZchip.

President and CEO Waldman
President and CEO Waldman

These seemingly positive figures did not stop the stock from tumbling as much as 15% down in the hours following the release. The investors were more affected by the net loss of $7.1 million compared to a $10.5 million profit in Q1 2015. The main reason for the loss lies in a leap in operating expenses from $90 million last year to more than $130 in the current quarter.

An uncertain course

The steep rise in operating expenses can be partially attributed to the recent acquisition of EZchip – general and administrative expended grew by almost $20 million this quarter. A more positive cost was the increase in research and development expenditure from, $58 million to $71 million this quarter.

Mellanox president and CEO Eyal Waldman said that Q2 was the fourth consecutive quarter of record revenue. “Our profitability grew 37.2 percent year-over-year. During the quarter we closed the acquisition of EZchip Semiconductor Ltd. We see great promise in the combination of EZchip’s intelligent processors, and Mellanox’s leading interconnect technology. We recorded strong growth in our Ethernet business, supported by adoption of our 40 Gigabit Ethernet adapters”.

According to Waldman, Mellanox’s customers are showing great interest in the new Spectrum based systems, and open Ethernet 100 gigabit switch based on the Mellanox’s latest ASIC chip. “Tests demonstrate superior performance, costs, resiliency, and power of Spectrum compared to alternative products”.

Spectrum to maintain Mellanox’s leading market position

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The new Spectrum Chip is the company’s seventh ASIC component. The new line of products delivers e 10, 25, 40, 50 and 100 Gigabit Ethernet connectivity solutions for data centers and server farms.

Spectrum is a complete system supplying a complete solution. It is based on a designated ASIC as an internal engine, delivering top performance. This is a repetition of Mellanox’s classic strategy that made it a leading force in InfiniBand connectivity for Super-Computers, and later in the internet age when it pushed its way to server farms and databases.

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Posted in: News , Semiconductors , Telecom and Communication

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