Technology Stocks : Mellanox Technologies, Ltd.
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To: w0z who wrote (905)11/28/2017 9:05:58 AM
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Jim Mullens
The Ox

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Eyal Waldman goes into lebatt

for his life: "We will win the war"

The founder and CEO of Mellanox has not been deterred by the Starbord's threats to replace the company's board of directors and management, and proudly declares that "there will be a war and we will win." He believes that it is not far off today that the company will reach $ 1 billion a year

Dror Reich06:5228.11.17

"Nissim will listen, there will be a war ... and we will be victorious," said Eyal Waldman, CEO and founder of Mellanox( Mellanox following the entry of Starbord: Is indeed a surprisingly limited ability

Starbord's move list includes investment in Yahoo, Marvell chips, Israeli pharmaceuticals Perrigo, and in the Israeli chip companies Zoran and DSPG. In the case of Zoran, the company was sold and in the case of DSPG the management won the battle, but the share nevertheless rose following the move.

The fund also operated in consumer companies, such as the Darden restaurant chain, where there was significant value overruns due to the realization of assets and the policy of repurchase of shares; And the office equipment networks Staples and Office Depot, whose merger led to many synergies.

To act just as they did in Marvell's case

Marvell's case is probably the closest to Mellanox's story now. The company also acted against shareholder interests, with over-investment in R & D, led by founder and CEO Sehat Sutardja, who was deposed, despite owning more than 10% of Marvell, compared to only 6.8% In the case of Mellanox, the situation is even more favorable for the fund, with 10.7% holding it, while Waldman holds 7.5%.

The list of major shareholders in Mellanox includes several Israeli entities, including Clal, which holds 2.3%. Oracle has held 7.4% of the company for a decade, but it has no strategic considerations. Its investment took place when Mellanox was another chip company, and Oracle was a material customer, and now it has changed a lot, and it seems that Oracle will not object to the sale or management changes.

Given that, Starboard does not seem to have a problem convincing investors of its plan. The move is expected to lead to a recovery in Mellanox's share, which is traded at a low price, without taking into account the potential to reduce inflated expenses due to negative sentiment among investors.

Will the new product leave Waldman in mind?

The results of Mellanox in the third quarter of 2017, as stated, were not brilliant. Divided by income, InfiniBand was responsible for $ 100 million (44% of revenue), a quarterly decline of 7%. However, it should be noted that the previous quarter was positively affected by an order from the US Department of Energy, about half of Mellanox's revenue from InfiniBand came from EDR technology, which provides data communications at a rate of 100 gigabits per second.

The Ethernet sector accounted for 49% of revenues, amounting to $ 110 million, and grew 27% in the quarter. The company noted that 65% of its Ethernet business comes from advanced technologies at speeds of up to 100 gigabytes per second.

The company produced

In the third quarter totaled $ 53 million in current operations, with gross profit of 70.7% and non-GAAP operating profit of 17.1%. Cash flow led to a $ 346 million cash fund at the end of the quarter against a debt of $ 200 million - net cash of $ 150 million. Mellanox's main growth next year is expected to come from Ethernet, and Mellanox's traditional InfiniBand activity is expected to remain stable.

Mellanox shares are trading at $ 58, after rising 16% since Starbord entered, but far from $ 114 at the peak of August 2012. "Two years after the merger with EZchip, 70% of employees are still with us - and Mellanox's first product with the technology of EZchip should be out in the coming months, "Waldman concluded the interview. Now he hopes it will be enough to keep the company in his hands.
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