Mellanox Technologies Ltd. (Nasdaq:MLNX) president and CEO Eyal Waldman began his company's conference call by saying, "We are disappointed with our results for the first quarter of 2017. Mellanox published its financial statements after the close of trading on Wall Street, and its share price sank 10.9% in after-hours trading.
Investors were disappointed with both the company's first quarter results and its forecasts; in both cases, the analysts' forecasts were higher. Mellanox also failed to meet its own forecast for the quarter, posting $189 million in revenue, 4.1% less than in the first quarter of 2016 (when Mellanox completed its $811 million acquisition of EZchip) and far less than its $200-210 million forecast.
Waldman noted that during Mellanox's decade as a public company, this was the second time it had missed its forecast. The company develops and markets communications equipment for high-speed data transmission in enterprise communications.
According to the GAAP rules, Mellanox posted a $12.6 million operating loss. Excluding various accounting expenditures, the company posted a non-GAAP profit, but its net profit totaled $14.7 million, down 62.6%, compared with the corresponding quarter last year. Net profit per share was only $0.29, while the market expected $0.49.
Analysts who expect higher sales and profit in the second quarter are mentioning the possibility that revenue will continue to decline in comparison with the corresponding quarter last year. Mellanox is projecting $205-215 million in revenue, compared with $215 million in the corresponding quarter in 2016, while the analysts expected $223 million. The company said its non-GAAP gross profit margin would be 70.5-71.5%, compared with 71.4% in the corresponding quarter in 2016 and 71.7% in the first quarter this year.
Credit Suisse concludes from Mellanox's figures that net profit in the second quarter will total $0.44 per share, while the analysts' previous forecast was $0.66. Mellanox attributes its poor results in the quarter to delays in the installment of HPC high-performance computers, among other things. Not a single major deal in this segment in the first quarter was announced, but Mellanox expects such deals in the coming quarters. The result was a decline in revenue in the InfiniBank sector.
"We believe that we have maintained our HPC market share, and expect quarter on quarter growth in the coming quarters, given our orders backlog and the opportunities available to us," Waldman said.
Ethernet sales jumped 17% in the first quarter, and sales of processors (obtained through the EZchip acquisition) also grew. Waldman stated, "We expected 2017 to be a growth year for Mellanox."
Cash flow from current activities totaled $35 million in the first quarter, and the company had $325 million in cash as of the end of the quarter. Mellanox's market cap is $2.5 billion.
Published by Globes [online], Israel Business News - www.globes-online.com - on April 27, 2017
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