Mellanox shares tumble on weak 4Q outlook

NEW YORK -- Shares of Mellanox Technologies Ltd. tumbled Thursday, after the semiconductor maker issued a disappointing revenue outlook for the current quarter and full year.

THE SPARK: During its fourth-quarter conference call late Wednesday, Mellanox said it expects its fourth-quarter revenue to total between $145 million and $150 million, which would push its 2012 revenue to between $524 million to $529 million.

Analysts, on average, expect revenue of $156.8 million for the quarter and $532 million for the year, according to a FactSet poll.

THE BIG PICTURE: Mellanox said Wednesday that its third-quarter profit jumped to $48.4 million, or $1.09 per share, from $4.8 million, or 13 cents per share, in the same quarter last year. Excluding one-time charges, the company said it posted an adjusted profit of $1.37 per share.

Revenue more than doubled to $156.5 million from $68.2 million.

Analysts, on average, expected a profit of $1.13 per share on $153 million in revenue.

The company, with headquarters in Israel and Sunnyvale, Calif., credited the results to higher demand from its existing markets as well as expansion into new ones. Mellanox focuses on servers and storage.

THE ANALYSIS: Lazard Capital Markets analyst Daniel Amir backed his "Buy" rating for the company, said that while the guidance was disappointing, its prospects remain strong. He attributed the weak outlook to the "lumpiness of large deals," adding that the outlook doesn't reflect a slowdown in the adoption of its technology.

Amir said that investors should look at the drop in Mellanox's stock price as a buying opportunity ahead of the company's analyst day this week and a key trade show next month, both of which could send the shares back up.

THE SHARES: Down $19.75, or 20 percent, to $78.40 in heavy morning trading, after dropping as low as $75.51 earlier in the day. Over the past 52 weeks, the company's shares have traded between $30 and $120.05.