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Mellanox rides the Xeon E5 wave

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Switch and server adapter card maker Mellanox Technologies is surfing on two upgrade waves: Its own shift to faster InfiniBand and Ethernet products and Intel's launch of the Xeon E5-2600 processors, which came out in early March.

In the first quarter of 2012 ended in March, Mellanox posted revenues of $88.7m, up 61.2 per cent compared to the year-ago quarter, and it shifted to a very respectable $12.4m profit from a $1.6m loss a year ago.

Eyal Waldman, president, CEO, and chairman at the network equipment maker, said in a conference call with Wall Street analysts that the Fourteen Data Rate (FDR) InfiniBand products that Mellanox rolled out early this year have been ramping nicely.

Mellanox pushed out the FDR products in anticipation of the launch of the Xeon E5s, which sport on-chip PCI-Express 3.0 slots that are necessary for 56Gb/sec InfiniBand as well as 40 Gigabit Ethernet.

FDR InfiniBand accounted for only 4 per cent of revenues in the third quarter of last year, or around $2.7m, but has recently gone gangbusters and hit $27.5m, or about 31 per cent of total sales, in the first quarter of this year.

Slower DDR InfiniBand products represented about 45 per cent of sales, or $39.9m, and have been hovering a little north of $40m a quarter of the past year. Older DDR InfiniBand products are still selling and accounted for $8m in sales.

Customers with QDR and DDR clusters need to upgrade as they add server nodes and they don't always want to replace switches and adapters, particularly for workloads that are not bandwidth or latency sensitive and are more focused on compute cycles. The point is, DDR and QDR sales are humming along and FDR is all of the growth in the current quarter.

Mellanox bought its way into the Ethernet market when it acquired rival Voltaire, and that business is having its ups and downs still as Mellanox finds its footing. The company's Ethernet switches and adapters accounted for 10 per cent of overall revenues, or about $8.9m, according to Mellanox CFO Michael Gray.

In the quarter, switches drove 35 per cent of revenues, or $31.1m, while chips, boards, and adapters accounted for 49 per cent of revenues, or $43.4m. The rest was software and services.

IBM accounted for 24 per cent of Mellanox revenues in the quarter, and Hewlett-Packard represented 18 per cent.

Mellanox said that the pent-up demand for the E5-2600 processors will create a revenue bump in the second quarter, with somewhere between five and seven big deals expected to drive about $30m in incremental sales. The company had two such deals in the first quarter – one in the United States and the other in Europe – that accounted for close to $10m. ®

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