Class Action Lawsuit Filed by Rigrodsky & Long Vs. Mellanox

Rigrodsky & Long, P.A. announces that a complaint has been filed in the United States District Court for the Southern District of New York on behalf of all persons or entities that purchased the common stock of Mellanox Technologies, Ltd. between April 19, 2012 and January 2, 2013, inclusive, alleging violations of the Securities Exchange Act of 1934 against the company and certain of its officers.

Mellanox is a fabless semiconductor company that produces and supplies high-performance interconnect products that facilitate efficient data transmission between servers, storage systems and communications infrastructure equipment and other embedded systems.

The complaint alleges that throughout the class period, defendants made materially false and misleading statements, and omitted materially adverse facts, about the company’s business, operations and prospects.

Specifically, the complaint alleges that:

• Mellanox was receiving a continuous stream of customer complaints concerning glitches it its InfiniBand product offerings during the Class Period;
• Mellanox knew that the pace of Intel Corporation’s development of its own competing IB adaptor would both diminish Intel’s demand for Mellanox’s product offering and detrimentally increase competition in the IB market in which Mellanox enjoyed a near monopoly;
• Mellanox knew that its outsized 1Q and 2Q sales growth were not sustainable and were not the result of Defendants’ business acumen, growth in the IB market generally, or significant adoption by the market of Mellanox’s own InfiniBand product offerings, but was instead due to short-term sales boosts attributable to Intel’s rollout of the Romley CPU upgrade;
• Mellanox’s inventory was dramatically increasing, both at the company and in the hands of at least one significant OEM customer, which would decrease sales and profit margins going forward; and
• as a result, Mellanox knew its actual sales growth supported neither its own 4Q 2012 guidance nor the inflated share price targets the investment community was modeling based on defendants’ bullish class period statements and guidance. As a result of defendants’ false and misleading statements, the company’s stock traded at artificially inflated prices during the class period.

According to the complaint, Mellanox repeatedly increased its own forward financial guidance throughout the class period – ignoring both the potential decreases in Intel’s own demand for Mellanox IB – related product offerings and competition from the networking behemoth with far superior sales and technological capabilities. Mellanox also concealed that repeated reports of significant product glitches with its own IB product offerings during the class period were diminishing sales demand and increasing the company’s manufacturing costs.

However, through a series of partial disclosures made between September 7, 2012 and January 3, 2013, the market learned that the company’s business was not as Mellanox had portrayed it throughout the Class Period, causing significant declines in the price of Mellanox stock. Culminating in a press release issued on January 2, 2013, the company conceded that it had grossly missed its 4Q 2012 revenue guidance by upwards of 20%. On this news, shares in Mellanox fell over 17%, closing at $50.70 per share on January 3, 2013, from a close of $61.19 per share on January 2, 2013, on volume of over 8 million shares.