Mellanox Decisive Answer to Starboard
21 January, 2018
Eyal Waldman: "2017 represented a year of investment and product transitions for Mellanox." Is it enough for Starboard? Probabely not, but these results may help Mellanox to win the hearts of its shareholders
The biggest share holder of Mellanox Technologies, Starboard Value LP fro New York, ask the company’s shareholders to vote for its nominees during the coming 2018 Annual Meeting of Shareholders. This move came 10 days following an open letter that was sent to the CEO and Board, claiming Mellanox is one of the lowest operating margins of any fabless semiconductor company of reasonable scale. “The Company dramatically underperformed the peer group and the broader semiconductor industry over the past 1, 3 and 5 years.”
This letter has turned out to be just a warning sign. The actual move came this week when Starboard presented a list of nine candidates for election to the Board of Directors at the Company’s 2018 Annual Meeting of Shareholders. Since Mellanox’ board consists of nine members, it means that Starboard is looking for a complete control over the company. Among them Peter Feld, the Managing Member and founder of Starboard and current member of the Board of Marvell Technology Group.
Approximately 12 hours later, Mellanox published its results of Q4 2017: Revenues were $237.6 million in the fourth quarter, and $863.9 million in fiscal year 2017. GAAP gross margins were 64.1 percent in the fourth quarter, and 65.2 percent in fiscal year 2017. The company projects Revenues of $970 million to $990 million in 2018 with gross margins of 68.0 percent to 69.0 percent.
“We are pleased to achieve record quarterly and full year revenues,” said Eyal Waldman, President and CEO of Mellanox Technologies. “2017 represented a year of investment and product transitions for Mellanox. Fourth quarter Ethernet revenues increased 11 percent sequentially, due to expanding customer adoption of our 25 gigabit per second and above Ethernet products across all geographies. For the full fiscal 2017, our revenues from the high performance computing market grew 13 percent year over year.”
Is it enough for Starboard? Probabely not, but these results may help Mellanox to win the hearts of its shareholders.