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If someone (that means you, Larry Ellison, and maybe you, Michael Dell, or maybe you, Ginni Rometty) was thinking about buying networking chip, switch, and adapter maker Mellanox Technologies, it is probably too late unless that certain someone wants to spend a whole lotta cash doing the deal.
Mellanox just wrapped up its second quarter, and not only is it selling InfiniBand stuff like crazy, it is also getting some traction in Ethernet wares and, more importantly, the company is piling up the black ink like a software maker even through it is fundamentally a hardware manufacturer.
These will likely be remembered as the salad days at Mellanox some years hence, when Intel has taken over networking much as it has done with processing. Perhaps during the 100 Gigabit InfiniBand and Ethernet rollouts maybe in 2014 or 2015 with battery like dell F5136 battery , dell 312-0306 battery , dell 312-0305 battery , dell D5561 battery , dell G5345 battery , dell Inspiron 500m battery , dell Inspiron 510m battery , dell Inspiron 600m battery , dell Latitude D500 battery , dell Latitude D505 battery , and maybe the next generation after that if Mellanox can keep its lead.
But don't tell Mellanox investors that, who are going nuts on Wall Street this morning in the wake of the Q2 report after the market closed yesterday (July 19), when the company posted $133.5m in revenues, more than double (110.1 per cent, to be precise) from the year ago period. Net income rose to $32.1m, a factor of 15X higher than in the second quarter of 2011.
That income is 24 per cent of sales – the kind of money that a software maker with a niche all to itself can command. And that profit in Q2 came despite a substantial increase in sales, marketing, research, and development costs that are being pumped into its switch-hitting SwitchX ASICs, the InfiniBand and Ethernet switches that use them, and the ConnectX adapters that talk to them from server ports.
Mellanox shares were up a staggering 38 per cent, to just under $92 a pop, when Wall Street opened. Profit taking by investors will no doubt bring that number down as the day progresses. But the point to remember is that Mellanox now has a market capitalization of $2.5bn or so, making it a very pricey acquisition indeed, even for a company that might generate more than $500m in revenues.
Mellanox generated $59.2m in cash from operations during the quarter, a record for the company, and exited Q2 with $327.8m in cash and investments. If networking assets were not so expensive, Mellanox might be able to do some acquiring of its own. Clearly the $218m acquisition of sometime rival, sometime partner Voltaire back in November 2010 has paid off.
In the conference call with analysts, Eyal Waldman, who is president, CEO and chairman at Mellanox, said that the ramp to 56Gb/sec FDR InfiniBand products was progressing nicely, with FDR products comprising 54 per cent of company sales in Q2, or around $74.7m compared to 31 per cent in the first quarter and 40 per cent in the four quarter of 2011. The tail end of last year made a big bump for FDR InfiniBand as Intel was shipping Xeon E5-2600 servers to supercomputer customers to get some machines on the Top 500 list in November, and the current quarter got a bigger bump as Intel actually announced the Xeon E5-2600s in March and the Xeon E5-2400 and E5-4600 processors in May.