Mellanox says has had multiple approaches

JERUSALEM, Sept 11 Tue Sep 11, 2012 11:24am EDT

JERUSALEM, Sept 11 (Reuters) - Israel-based chip designer Mellanox Technologies, whose share price has risen sharply over the past year, has been approached several times by potential buyers, its chairman and chief executive said, adding he wanted to remain independent.

"As long as we think we can grow faster than the company we can merge into, the return on investment will be better to our shareholders, we will stay independent," Eyal Waldman told Reuters at the High-Tech Industry Association conference.

"Once we think our growth rate will be similar or slower to a company we merge into, we may decide otherwise," he said on Tuesday.

Software maker Oracle Corp has a 10 percent stake in Mellanox and Waldman said he has a "gentleman's agreement" with the U.S. company's CEO, Larry Ellison, that it would not raise its stake. Fidelity owns 14 percent of Mellanox.

"We have a very good feeling about the momentum, the design wins, the applications, the market share we are taking," Waldman said. "We think we are going to continue growing for a long time, we can grow to over $1 billion in revenue in the future," he said, declining to give a time frame for his forecast.

Mellanox makes InfiniBand products that allows databases, servers and computers to talk with one another. It has more than 85 percent of that market, which competes with another interconnect technology called Ethernet where the company is a small player.

It is forecast to record revenue of $532.5 million this year and $665 million next year, according to Thomson Reuters I/B/E/S.

While the company has estimated third-quarter revenue will more than double to $150-$155 million, Waldman declined to give a forecast beyond that.

Mellanox stock quadrupled in value over 12 months to hit $120.05 last week. It has since fallen back, and was down 0.5 percent on the day to $101.11 at 1520 GMT.

Deutsche Bank analyst Dan Harverd said last week, as he initiated coverage of Mellanox with a "buy" rating and $140 price target, that InfiniBand was becoming increasingly important in data centres to remove bottlenecks.

"It is no coincidence that Mellanox's growth rate accelerated in the quarter immediately following the launch of Intel's new super-fast server platform, Romley," Harverd said.

Intel's Romley platform has led to high demand for Mellanox's interconnect products. While Intel is a major client for Mellanox in the InfiniBand sector, it is also its only competitor, having acquired four companies in the field.

Waldman said real competition in InfiniBand was at least three years down the road.

"Mellanox is also not just sitting quietly. We are also executing and I think will come out with solutions that may be better than what Intel is coming out with," he said.

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