Sources inform ''Globes'' that InfiniBand developer Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) is about to sell equipment to two huge Internet server farm projects by Microsoft Corporation (Nasdaq: MSFT) and Google Inc. (Nasdaq: GOOG). Mellanox's estimated revenue from the two projects is $150-200 million, which it will begin to recognize from the second quarter of 2013.
Rumors of the projects boosted Mellanox's share price 6% by mid-afternoon on the TASE today to NIS 166, and 4.4% in premarket trading on Nasdaq to $46.04, giving a market cap of $1.9 billion.
Mellanox has been going through hard times on the capital market. Disappointing guidance in the past year has cut its share price 60%. Two weeks ago, the company announced that it was delisting from the Tel Aviv Stock Exchange (TASE), after Israeli investment institutions refused to let Mellanox chairman and CEO keep both positions in the company he founded. The TASE delisting at the end of August will greatly reduce the Israeli investment institutions' stakes in the company, but meanwhile helped accelerate the slide in the share price.
On Monday, Microsoft announced that it will expand its Iowa data center at an investment of almost $700 million. The sources said that Mellanox will earn more than $100 million from the contract with Microsoft, with most of the revenue being recognized in the fourth quarter. The assessment is based on a previous guidance, in which Mellanox said that it expects major deals from the second half of 2013. The company began large projects with Microsoft in 2012, and Mellanox said that the Microsoft Bing Maps project boosted its revenue last year.
While this is Mellanox's first large project with Microsoft, it has already worked on large projects with Google, especially in 2012. The current project with Google, which Mellanox has never officially reported, should generate $50 million revenue, making it one of the largest projects in Mellanox's history.
The analysts' 2013 revenue consensus for Mellanox is $422 million, 15% less than in 2012. Recognition of part of the revenue from the Microsoft and Google projects this year will boost Mellanox's revenue.
Mellanox said in response that it does not comment on rumors.
Published by Globes [online], Israel business news - www.globes-online.com - on June 25, 2013
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