Oracle foretells huge growth for Mellanox

Shlomi Cohen

A change at the top at SanDisk occurs when the company is in quite a strong position. Why don't analysts see that?

Among the companies whose shares I hold in my portfolio tracked at "Globes", AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC) and Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) report tomorrow, and SanDisk Corporation (Nasdaq:SNDK) and Microsoft report on Thursday.

I believe that Audiocodes will continue with its tradition of a long string of quarters in which it has succeeded to grow, by meeting market forecasts and guidance, and maybe even beating them. This is in light of the momentum recently in its target market, enterprise VoIP solutions.

For Mellanox, the quarter is not all that relevant, because it is the final one before its big merger with Voltaire Ltd. (Nasdaq:VOLT), which is set to close in the first half of February. Mellanox's great potential could be seen last week from what Morgan Stanley analysts wrote about Oracle. Oracle is a big customer of Mellanox's , and also bought a 10% stake in the company when it decided to build its hardware platforms, Exadata and Exalogic, on the basis of Mellanox's Infiniband technology for fast communications.

The Morgan Stanley analysts believe that those two platforms will eventually contribute to higher sales than what the market currently estimates. Beginning with the May quarter, Exadata will reach a sales pace of $1 billion per quarter, and in the long term, believes Oracle's management, almost all of its 290,000 database customers will move to Exadata-based hardware. Pricing it at $1 million, which is the average price for the platform, you get huge long term potential for Oracle, and you can derive from that a huge long term potential for Mellanox as well.

SanDisk will report after the close of trading on Thursday, and in contrast to Apple and Google, the switching of the pilot in the cockpit, which took place at the beginning of the month, was planned, and timed specifically for the beginning of 2011, because of the company's strong position.

The conference call with analysts will be led for the first time by new CEO Sanjay Mehrotra, who replaced Dr. Eli Harari at the beginning of the year. Maybe now, as a retiree, Harari will return to the start-up he wanted to set up before SanDisk - developing fishing rods. Thanks to the advice of his wife, who suggested, "Deal with what you understand", he set up SanDisk, and the rest is history.

Last week I met for the first time the two most senior Israelis in the new management set-up at SanDisk, Mehrotra's deputies, and I got general confirmation that the company's situation really is strong. The first one is CTO Yoram Cedar, who has been with the company 13 years already. Together with Mehrotra, he took on all of Harari's previous roles, from strategy through existing and future technologies, up to the complicated management of huge investments in combined lines with Toshiba in Japan.

The second executive is Dan Inbar, who is responsible for the entire OEM segment, which stands at the base of the successful business model of msystems, which was adopted with stunning success by SanDisk as well.

Based on the previous quarter, OEM is responsible for 60% of the company's sales, and just like Dov Moran succeeded in getting his unique storage solutions inside the telephones of rival Samsung, Inbar's team has succeeded, according to Morgan Stanley analysts, to penetrate Samsung's tablet computer, the Galaxy, which has become a hit.

Samsung's status is strong, because on one hand we see huge demand for smartphones, tablet computers, and thin laptops, all of which are based on NAND flash solutions, and on the other hand chip makers are not going crazy with investments in unnecessary lines, which in the past have brought prices crashing down. Also, SanDisk specifically has a big advantage over all competitors with its X3 technology, which allows it to significantly increase its gross profit.

With all that, I don't yet understand how it can be that all the analysts forecast a year of low profit for the share, compared with 2010.

Published by Globes [online], Israel business news - www.globes-online.com - on January 25, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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