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As with the preceding quarters, Mellanox again beat analysts' estimates for the third quarter, with $29.1 million revenue, slightly above the analysts' consensus of $29 million. Revenue was 29 percent more than the corresponding quarter of 2007 and 3 percent more than for the preceding quarter.
Gross profit was $23 million, giving a margin of 79.1 percent of revenue, slightly less than for preceding quarter. The company posted a GAAP-based net profit of $5.2 million ($0.16 per share) and a non-GAAP net profit of $9.6 million ($0.28 per share), beating the analysts' estimates of non-GAAP earnings per share of $0.22-0.24.
Although Mellanox's performance has not been affected by the slowdown, the share has taken a hit. It has fallen 60 percent on Nasdaq since the beginning of the year, mostly in the last two months. The share fell 1.8 percent in early trading on Nasdaq today, to $7, giving a market cap of $220 million.
During the conference call following the publication of the results, Mellanox chairman, president and CEO Eyal Waldman said, "We began to see some slowdown during the third quarter, especially during the second half of the quarter. We still expect the growth thought we would see in the future, but the economic outlook is very limited, and it's hard for us to see clearly the orders backlog for the fourth quarter."
Waldman, who until now has been optimistic about the effect of the economic crisis on the company's business, was compelled by analysts to comment on the company's longer term forecasts. "I think that we'll continue to see 30 percent year-on-year growth. The question is, when will growth resume? At the moment, customers are sitting on the fence in terms of investment, and it's not clear when they'll resume investing in computer infrastructure," he said.
Mellanox had $171 million in cash and cash equivalents at the end September. Waldman says, "We definitely prefer seeking acquisitions of technology companies, and we've contacted some companies on this subject."
Waldman surprised the analysts by commenting on the kind of companies he is looking for. He said that Mellanox was seeking companies in three areas: "Semiconductor companies in our market, semiconductor companies in parallel markets, and to climb the food chain and seek companies that also make systems." The most prominent company in Mellanox's area of business is Israel's Voltaire Ltd. (Nasdaq: VOLT).
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