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Mellanox: Fiscal 3Q13 Financial Results

Revenue plunging 33% and no more profitable

 (in US$ million) 3Q12 3Q13  9 mo. 12   9 mo. 13
 Revenues 156.5 104.1 378.7  285.3
 Growth -33%  -25%
 Net income (loss) 48.4 (5.4) 92.9 (15.6)

Mellanox Technologies, Ltd. announced financial results for its third quarter 2013, ended September 30, 2013.

Third Quarter 2013 Highlights

  • Revenues were $104.1 million
  • GAAP gross margins were 64.4%
  • Non-GAAP gross margins were 69.0%
  • GAAP operating loss was $4.8 million
  • Non-GAAP operating income was $13.7 million
  • GAAP net loss was $5.4 million
  • Non-GAAP net income was $13.1 million
  • GAAP net loss per diluted share was $0.12
  • Non-GAAP net income per diluted share was $0.29
  • $16.4 million in cash was provided by operating activities
  • Total cash and investments was $306.4 million at September 30, 2013

Financial Results

  • In accordance with U.S. GAAP, the company reported revenue of $104.1 million for the third quarter of 2013, up 6.0% from $98.2 million in the second quarter of 2013, and down 33.5% from $156.5 million in the third quarter of 2012.
  • GAAP gross margins in the third quarter of 2013 were 64.4 percent, compared with 67.2% in the second quarter of 2013, and 69.1% in the third quarter of 2012.
  • Non-GAAP gross margins in the third quarter of 2013 were 69.0 percent, compared with 69.4% in the second quarter of 2013, and 70.5% in the third quarter of 2012.
  • GAAP net loss in the third quarter of 2013 was $5.4 million, or $0.12 per diluted share, compared with GAAP net loss of $1.7 million, or $0.04 per diluted share in the second quarter of 2013, and GAAP net income of $48.4 million, or $1.09 per diluted share in the third quarter of 2012.
  • Non-GAAP net income in the third quarter of 2013 was $13.1 million, or $0.29 per diluted share, compared with $13.8 million, or $0.30 per diluted share in the second quarter of 2013, and $60.1 million, or $1.37 per diluted share in the third quarter of 2012. The third quarter 2013 non-GAAP net income excludes $11.9 million of share-based compensation expenses compared to $11.2 million in the second quarter of 2013, and compared to $9.4 million in the third quarter of 2012. The third quarter 2013 non-GAAP net income also excludes amortization of acquired intangible assets of $4.6 million and $2.0 million of acquisition related charges associated with the acquisition of Kotura, Inc. and IPtronics A/S, compared to amortization expenses of acquired intangible assets of $2.5 million and acquisition related charges associated with the acquisition of Kotura, Inc. and IPtronics A/S of $1.8 million in the second quarter of 2013, and compared to $2.3 million of amortization expenses of acquired intangibles assets in the third quarter of 2012.
  • Total cash and investments were $306.4 million at September 30, 2013, compared to $411.3 million at June 30, 2013. The company paid $123.5 million in cash for its acquisitions of Kotura, Inc. and IPtronics A/S, and generated $16.4 million in cash from operating activities in the third quarter.

We completed our acquisitions of Kotura and IPtronics in the third quarter, and the integration of these teams and their advanced silicon photonics technologies is going very well,” said Eyal Waldman, president and CEO, Mellanox. “These technologies will help Mellanox to continue to lead the fast interconnect market with our IB and Ethernet offerings, and to offer market-leading solutions for high-performance computing, Web 2.0, cloud, storage, database and financial applications. We are experiencing good momentum around our end-to-end Ethernet technologies in various market segments.”

Comments

Abstracts the earnings call transcript: Eyal Waldman, CEO and president: "In the third quarter, our FDR 56Gb/s InfiniBand revenue contribution was 48% of total revenue compared to 52% in the second quarter of 2013. Our Ethernet products contributed 15% of revenue. Our 40GbE revenue grew 31% sequentially. "We expect our sequential revenue growth to continue in the fourth quarter. "HPC now accounts for less than 50% of our year-to-date revenue. "Our development of Mellanox's 8th generation of interconnects that will provide speeds of 100Gb/s in the 2014, 2015 timeframe is on track." Yakov Shulman, CFO: "Combined, revenues from our IC and board products represented 45% of third quarter revenues. Switch system's revenues accounted for 35%. Revenues from our 56Gb/s IB-based product remains essentially unchanged in absolute dollars and represented 48% of revenues in Q3 2013, compared to 52% in Q2 2013. Revenues from our 40Gb/s IB-based products represented 18% of revenues in Q3, down from 25% of revenues in Q2. "20Gb/s IB-based products represented 7% of revenues in Q3 2013, compared to 5% of revenues in Q2 2013. Ethernet-related revenues represented 15% of the third quarter revenue compared to 14% of the revenue in the second quarter. We got to more than 10% customers in the third quarter, that combined, represented 29% of revenues. They were IBM with 17% and HP with 12%."

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