October 18, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Israeli fabless semiconductor company Mellanox Technologies (Nasdaq: MLNX ) plunged 21% today after issuing guidance that disappointed Wall Street.
So what: Mellanox's third-quarter results -- EPS of $1.37 on revenue of $156.5 million -- easily topped analyst estimates, but downbeat sales guidance for the current quarter suggests that demand is slowing. Specifically, management expects a slowdown in large deals during the fourth quarter, reinforcing investor concerns over shrinking margins and intensifying competition.
Now what: Management now sees fourth-quarter revenue of $145 million to $150 million, well below the Wall Street consensus of $157 million. "[We] continue to see increased traction for our 10 and 40 Gigabit Ethernet products," Chairman and CEO Eyal Waldman reassured investors. "We expect additional partners and customers to benefit from the higher return-on-investment that our fast interconnect solutions provide to them." With the exciting long-term trends of big data and cloud computing still working heavily in Mellanox's favor, I'd look into today's pullback as a possible buy-in opportunity.
Interested in more info on Mellanox? Add it to your watchlist.